The term "1h of Income Tax Act" most likely refers to Section 206C(1H) of the Income Tax Act. This specific section was introduced by the Finance Act 2020 and became effective from October 1, 2020. It mandates that a seller who sells goods and whose total sales exceed Rs. 50 lakhs in a financial year must collect Tax Collected at Source (TCS) from the buyer. Key points about Section 206C(1H) are:
- Applicable if the seller's turnover in the preceding financial year exceeds Rs. 10 crore.
- TCS is collected at a rate of 0.1% on the amount of consideration received exceeding Rs. 50 lakhs from a single buyer in a financial year.
- If the buyer does not provide a PAN or Aadhaar, the TCS rate increases to 1%.
- This provision aims to monitor high-value transactions and combat tax evasion.
- The seller collects the TCS at the time of receipt of payment and deposits it with the government.
Section 206C(1H) applies to all sellers including individuals, firms, companies, etc., engaged in selling goods. Certain goods and transactions, like exports and items covered under other TCS provisions, are excluded. This section is part of the broader Income Tax Act, 1961 framework but also is retained under the updated Income Tax Act 2025 set to come into effect from April 1, 2026, which aims at simplifying and modernizing the tax code in India. For an overview of the specific obligations under Section 206C(1H) and the impact on buyers and sellers, see the detailed explanations above. For context on the Income Tax Act 2025 which will carry forward and update this provision, see summaries from recent notifications.