194Q - TDS on payment of certain sum for purchase of goods

Deduction of tax at source on payment of certain sum for purchase of goods  
[ Section 194Q of Income Tax Act, 1961] 

The Finance Act, 2021, inserted a new Section 194Q to provide for deduction of tax by a buyer from the purchase of goods provided certain conditions are satisfied. This provision is applicable w.e.f. July 01, 2021.

 

Who is liable to deduct tax under Section 194Q?

 Buyer of goods with > turnover of Rs. 10 crores in Immediately Previous financial year

For example: if buyer of goods is having turnover more than 10 crores in financial year 2020-2021, he shall be liable to deduct TDS in financial year 2021-2022.

When TDS is required to be deducted under section 194Q?

 

W.e.f. July 01, 2021, provisions of section 194Q is applicable and If all of the following conditions are satisfied then TDS is required to be deducted from the purchases of goods made by a buyer:

 (a) Seller of goods should be Resident Person

 (b) Goods are purchased for a value or aggregate of value exceeding Rs. 50 lakhs** in any previous year; and

 (c) The buyer should not be in the list of persons excluded from the provision for deduction of tax.

 

** However for the purpose of calculation of threshold limit of Rs 50 Lakhs sale/purchase transaction, the same has to be considered from April 01, 2021 though TDS u/s 194Q is applicable w.e.f. July 01, 2021. Moreover Threshold limit of Rs. 50 lakhs includes only sale transaction of goods and not sale of services

What is rate of TDS?

Particulars	Rate of Tax deducted by Buyer
Where PAN  is furnished by seller	0.1%
Otherwise (Where PAN  is NOT furnished by seller)	5%

 

When TDS U/s 194Q should be deducted?

TDS is required to be deducted

-        at the time of credit of such sum to the account of the seller

or

-        at the time of payment thereof by any mode,

whichever is earlier.

 

When Provisions of section 194Q shall not apply to a transaction ?

Provisions of section 194Q shall not apply to a transaction on which –

-       -  tax is deductible under any of the provisions of this Act: and

-        tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies

When TDS is required to be deposited in Government Account?

TDS under this section shall be deposited with government by 7th day of subsequent month.

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