Analysis of Section 194Q



Quick Summary
Section 194Q, effective from July 1, 2021, mandates TDS deduction on the purchase of goods. Buyers exceeding a turnover threshold and purchasing goods worth over fifty lakh rupees from a single seller in a financial year must deduct 0.1% TDS. This section applies when the buyer's preceding year's turnover exceeds Rs. 10 crore and the aggregate purchase from a specific seller surpasses Rs. 50 lakh in the current year.

TDS on purchase of goods under Section 194Q (w.e.f 01.07.2021)

Abstract of the section is as follows

Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, 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, deduct an amount equal to 0.1 % of such sum exceeding Rs.50L as income-tax.

Section 194Q: TDS on Goods Purchase Explained

Analysis

Applicability

  • To the buyer whose Gross sales/ Receipts/ Turnover in the preceding financial year exceed Rs.10 Cr and
  • Aggregate amount of Purchases from such particular buyer in the financial year exceeds Rs.50L
 

Non Applicability

The Provisions of this newly inserted section is not applicable when:

  • The transaction on which tax is deductible under any provisions of the Act
  • The transaction covered by TCS under 206C.

(However, it is applicable to the transaction covered under 206C (1H) TCS on sale of goods)

If the transaction on which TCS is required to be collected under Section 206C (1H) and TDS is required to be deducted under Section 194Q, then the provisions of Section 194Q will prevail.

 

Rate of TDS

  Rate
Seller having PAN 0.1%
Seller not having PAN 5%

Illustration

Seller's Turnover of last year(In Cr) Buyer's Turnover of last year(In Cr) Receipt(sale)/Payment(purchase) in the current year(In Lakhs) Amount for TDS/TCS(In Lakhs)

TDS

TCS

9

9

57

7

NA as the turnover is less than 10 Cr NA as the turnover is less than 10 Cr

11

9

57

7

NA as the turnover is less than 10 Cr Applicable@0.1% on 7L under 206C(1H)

9

11

57

7

Applicable@0.1% on 7L under 194Q NA as the turnover is less than 10 Cr

11

11

57

7

Applicable@0.1% on 7L under 194Q Not applicable because if the transaction is covered under TDS provisions then TCS need not be collected.

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About the Author

CA

CA Ch. KowsalyaFull-Time Partner | KLN Co, Chartered Accountants An experienced Chartered Accountant serving as a Full-Time Partner at KLN Co., Chartered Accountants, Visakhapatnam. Our firm specializes in delivering high-quality professional services in Audit, Direct Indirect Taxation, Corporate Law and Regulatory ... Read more

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