Section 194Q of the Income tax Act 1961

Divyam Agarwal | Last updated: 02 July 2021

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Quick Summary

Section 194Q of the Income Tax Act 1961, introduced by the Finance Act 2021, requires specified buyers to deduct Tax Deducted at Source (TDS) when purchasing goods from resident sellers. This applies to buyers whose business turnover exceeds ₹10 crore in the preceding financial year, on purchases exceeding ₹50 lakh in a financial year. The TDS rate is 0.1% of the amount exceeding ₹50 lakh, deducted at the time of credit or payment. The provisions became effective from 1st July 2021.

The Finance Act, 2021 has introduced a new section called Section 194Q of the Income Tax Act 1961, which mandates the specified buyer to deduct TDS on the purchase of goods from the resident seller. In this article, the following things are covered- Provisions of section 194Q Exemption a

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FAQ :

Any buyer responsible for paying a resident seller for the purchase of goods, where the value or aggregate value exceeds fifty lakh rupees in a previous year, must deduct TDS under Section 194Q.

A buyer is covered if their total sales, gross receipts, or turnover from business exceeded ten crore rupees during the financial year immediately preceding the year of purchase.

The TDS rate is 0.10% of the sum exceeding fifty lakh rupees. If the seller does not provide their PAN, the rate is higher, currently 5%.

Tax must be deducted at the time of crediting the sum to the seller's account or at the time of payment, whichever occurs earlier.

No, Section 194Q is only applicable when payments are made to resident sellers and does not apply to import purchases.

The section does not apply to transactions where tax is already deductible under other provisions of the Act, or where tax is collectible under Section 206C, except for transactions covered by Section 206C(1H).