Section 194Q of the IT Act, 1961

Section 194Q of the Income Tax Act, 1961 is a provision that deals with Tax Deducted at Source (TDS) on the purchase of goods.

Applicability of Section 194Q

Section 194Q of the Income Tax Act, 1961 is applicable to any person responsible for paying any sum to a resident for the purchase of goods if the value of such purchase exceeds Rs. 50,00,000. This includes individuals, firms, companies, or any other entity that makes payment for the purchase of goods. The TDS provisions of Section 194Q apply to all residents, regardless of whether they are engaged in a business or profession. The person responsible for paying must deduct TDS at the rate of 0.1% on the amount of payment made and deposit it with the government.

As per the explanation to Section 194Q (1) of the Income Tax Act, 1961, the buyer shall be considered as a person whose total sales, gross receipts, or turnover exceeds Rs. 10 crore in the immediately preceding financial year of the year of the transaction. This means that if a person's sales, gross receipts, or turnover exceed Rs. 10 crore in the previous financial year, they are required to deduct TDS on the purchase of goods under Section 194Q.

What happens if PAN not furnished?

There is an exception to the applicability of Section 194Q in cases where the seller does not hold a valid PAN (Permanent Account Number). In such cases, the rate of TDS will be increased from 0.1% to 5% under the provisions of Section 206AA of the Income Tax Act, 1961.

What are the consequences of late deduction under 194Q TDS?

If an individual or organization fails to deduct TDS under Section 194Q of the Income Tax Act, 1961, they will be charged interest on the amount of TDS that should have been deducted. The interest rate is generally 1.5% per month from the date on which the TDS was deductible to the date on which it is actually deducted. The late deduction of TDS attracts interest as a penalty for not fulfilling the obligation to deduct TDS and deposit it with the government in a timely manner.

Due dates to deposit TDS

The due dates for depositing TDS under Section 194Q of the Income Tax Act, 1961 are as follows:

• For TDS deducted in the month of March: 30th April.
• For TDS deducted in the months of April to February: 7th day of the following month.

It is important to note that the TDS amount must be credited to the government's account on or before the due date to avoid interest and penalty charges for late deposit.