For five years, a sale of goods above the Rs 50 lakh mark to one party could attract tax from either end. The buyer deducted under section 194Q, and where the buyer did not, the seller collected under section 206C(1H). Working out which side acted was a standing argument between two accounts departments every year.
That argument is over. From 1 April 2025 section 206C(1H) does not apply, by the third proviso inserted by the Finance Act, 2025.
And the Income-tax Act, 2025 does not bring it back. The collection table in section 394(1) has no collection on a sale of goods at all.
What the position is now
One side, one test.
The buyer deducts on purchases of goods from a resident seller, on the part of the year purchases from that seller above Rs 50 lakh, at 0.1 per cent.
Only a buyer whose turnover was over Rs 10 crore in the preceding year deducts at all. A smaller buyer deducts nothing, and now that the seller side is gone, nobody does.
The seller collects nothing on such a sale.
The provision numbers differ by year. For financial year 2025-26 the buyer deducts under section 194Q(1) of the 1961 Act, with the turnover test in its Explanation. From tax year 2026-27 the same obligation is serial number 8(ii) of the Table in section 393(1) of the 2025 Act, with the turnover test in section 402(6).
Pro tip
The question to ask a client with a large customer is no longer "did they deduct or do we collect". It is only "is this customer turnover over Rs 10 crore", because if it is not, nothing happens on that sale at all.
What this changes in a sales ledger review
The work that used to be done on the sales side largely disappears, and what remains is a different question.
You are no longer checking whether your client should have collected. You are checking whether your client customers should have deducted, and whether what they deducted shows up against your client PAN.
That makes the sales-side review a reconciliation rather than a compliance check. Total the year sales per customer, find the ones over Rs 50 lakh, work out 0.1 per cent of the part above the limit, and that is roughly what should appear in Form 26AS against that customer TAN.
A gap there is not your client default. It is a credit your client is entitled to and has not received, which is worth a letter before the return goes in rather than after.
The limit is crossed by a running total, not by an invoice
This is where mechanical checks go wrong, and it was wrong in the same way under the old rules.
The Rs 50 lakh is a total for the year for that party, not a per-invoice figure. It is usually crossed by an unremarkable invoice in the middle of the year, and the date it is crossed matters, because that is when the obligation starts.
So the correct method is to sort that party transactions by date, run a total, and record the date the total goes past the limit. A sale return is a negative amount in that running total.
An approach that looks for large invoices finds the wrong parties and misses the right ones. A party with sixty invoices of a lakh each is well over; a party with one invoice of forty lakh is not.
Important
Sales lines that name no customer ledger cannot be tested. If a sales ledger carries unallocated amounts, the limit ends up being tested against the ledger as though it were a single customer, which is both wrong and alarming looking. Allocate first.
What about the other collections?
Collection at source has not gone away. What has gone is the one on an ordinary sale of goods.
The other collections continue under their own entries: scrap and the other specified goods, a motor vehicle above the stated value, remittances under the Liberalised Remittance Scheme and overseas tour packages, and the leasing and licensing cases. Each has its own rate and its own trigger, and none of them was touched by the removal of the sale of goods entry.
The collection statement itself is still filed. 27EQ to financial year 2025-26, and Form 143 from tax year 2026-27, with the certificate being 27D and then Form 133. The full mapping is here.
So a client who collected only under the sale of goods entry may have no collection statement to file at all from now on, and a client who collects on anything else still does.
Getting the figures out of the books
The whole test runs on one thing: the year sales per customer, by date.
That is a straightforward read from the accounting system, and it is the same aggregation that answers several other questions a practice asks at the same time of year, which is an argument for doing it once rather than per question.
Where it gets delicate is the thresholds themselves. Rs 50 lakh, 0.1 per cent and Rs 10 crore are the current figures, and the reason to hold them as dated entries per financial year rather than as constants is that a threshold typed into a spreadsheet in 2022 is still sitting in that spreadsheet being applied to 2026, and nothing about it looks wrong.
Greenote reads the limit, the rate, the buyer turnover test and whether a seller collects at all from the year own rules table, each quoting the provision it came from, and works the two sides out in one place so the purchase side and the sales side cannot give different answers.
Conclusion
The simplification is real and it is in the client favour: one side, one test, and no more correspondence about who is acting.
The risk during the changeover is the opposite of the old risk. It is not double collection any more. It is a seller who carries on collecting out of habit, on a provision that no longer applies, and a buyer who assumes the seller is handling it.
The renumbering that governs which provision applies to which year is here, and the exposure check on the purchase side is here. See what the TDS workspace covers.
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