TDS on purchase of goods under Section 194Q
- Mayur Bhadani
- Jun 25, 2021
- 3 min read
TDS on Purchase of Goods [Section 194Q]
Section 194Q of the Income Tax Act is recently introduced vide the Finance Act, 2021. Under section 194Q “It is provided for TDS by the person responsible for paying any sum to any resident for purchase of goods. The rate of TDS is kept very low at 0.1%, this implies that by introducing this new section government can easily track the non disclosure of transaction which is reported under this section.
As per charging proviso to this section, this is going to apply to any person being a buyer responsible for making a payment to a resident (Not applicable for Import Purchase from a supplier outside India) for purchase of goods (Not applicable to services) when value or aggregate of purchase from a supplier or payment whichever is earlier Rs.50 lacs during the previous year. The transaction with any supplier with the addition of which your aggregate purchase/payment for a purchase from that supplier exceeds Rs.50 lacs, will be the transaction effective which TDS will have to be deducted @0.1% of the Purchase transaction or payment thereof whichever is earlier.
This section will also apply to an assessee whose aggregate Turnover in the immediate previous year exceeds Rs.10 crore.
Date of Applicability of Section 194Q
This provision will be applicable with effect from 1st July 2021. Purchase or payment made before 01.07.2021 shall not be considered for TDS deduction, however, it will be considered for checking the limit of Rs. 50 Lac in a year. So, purchases made up to 30.06.2021 shall not be liable to TDS and out of 60 Lac
Conditions for applicability of section 194Q
Buyer is required to deduct tax under the provisions of Section 194Q
If his total sales or turnover exceeds Rs. 10 crores during the financial year immediately preceding the financial year in which he purchases the goods
Value or aggregate value of Goods purchased exceeds Rs. 50 lakhs in any previous year
The buyer purchases goods from a resident person
TDS shall also be deducted on advance payment made
The scope of this TDS provision with the help of an example.
Assuming that your turnover for the Financial year ending with 31st March 2020 was more than 10 Crore and purchase of goods by you from the seller is of the value or aggregate of such value exceeding 50 lakhs in the previous year, TDS provisions as mentioned in Section 194Q are applicable on you and it is to be deducted @ 0.1%, where the PAN has been provided to you, and 5% in any other case.
Now let suppose, your turnover does not exceed 10 crores, Section 194Q would not apply to you. However, if the seller’s turnover exceeds Rs.10crores, then he would become liable to collect TCS under Section 206(1H).
In the section, it is provided that if TDS is deducted on the transaction under any other section of the Income-tax Act (Other than TCS collected under section 206(c)(1H) of the act then TDS is not required to be deducted on the transaction.
Rate of TDS under section 194Q
Where PAN has been provided @ 0.1% on the payment.
Where PAN has not been provided by the seller, then the rate will be 5%.
Whether TCS u/s 206C (1H) of Income Tax is to be collected on sales of goods above 50 lakhs or TDS u/s 194Q is to be deducted by the buyer ?
Section 194Q shall override section 206C(1H) and hence in such a case only the buyer is needed to deduct TDS and the seller need not to required deduct TDS under section 206C (1H).
Example- Mr. Seller sold goods to Mr. Buyer and collecting TCS under section 206C(1H), however after applicability of sec. 194Q (1 July 2021) Mr. Buyer is covered by sect 194Q. Since sec 194Q is an overriding section hence Mr. buyer shall be liable to deduct TDS under this section and Mr. Seller shall not require collecting TCS under sec 206 C (1H)
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