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With effect from 1.07.2021 Finance Act, 2021 had inserted section 194Q in Income Tax Act, 1961 to provide a deduction of tax on certain purchases. Section 194Q of the Income-tax Act states that any person who buys goods of an amount exceeding 50 lakhs rupees from a resident seller in any previous year shall at the time of making the payment or at the time of making such credit to the account of the seller, whichever is earlier deduct an amount of 0.1% of such amount exceeding 50 lakh rupees as income tax. Further, if any sum referred under subsection (1) is credited to any account of the seller in the books of account of such person such credit of income such credit of such income to the accounts and provision of this section apply accordingly.

APPLICABILITY OF SECTION 194Q

The tax deducted under section 194Q shall be applicable on businesses whose gross receipts, turnover, or total sales exceed 10 crores in the assessment year 2020 - 2021.

TDS and TCS on Purchase of Goods Under Income Tax

CONDITIONS FOR DEDUCTING TDS

For deducting TDS under section 194Q following conditions are to be satisfied

(i) The seller should be a resident of India
(ii) The aggregate value of purchase should be more than 50 lakhs in the previous year
(iii) The transaction should is not subject to section 206C (1H).

TRANSACTION WHERE 194Q NOT APPLIED

(i) Transaction in securities and commodities through recognized stock exchange

(ii) Transactions in electricity, Energy-saving certificates & Renewable Energy certificates traded in accordance with Regulation 21 of Central Regulatory Electricity Commission (CERC)

TCS APPLICABLE ON SALE OF GOODS

With effect from 1.10.2020 Finance amendment act, 2020 brings amendment in section 206C(1H) OF Income tax, 1961, which imposes TCS on seller whose turnover is more than 10 crores in preceding financial year, is liable to collect TCS on the amount exceeding Rs. 50 Lakhs.

APPLICABILITY OF SECTION 206 (1H)

The provisions of section 206 (1H) apply to businesses

(i) Whose turnover exceeds Rs. 10 cores during the financial year
(ii) The gross receipts, total sales of goods (except services) exceed Rs. 50 lakhs.

 

TIME OF CHARGING TCS ON SALE OF GOODS

All sale consideration (including advanced payments) that is carried on or after the 1st of October, 2020 exceeds 50 lakhs TCS should be collected on the receipt of the amount from the buyer.

RATE OF COLLECTING TCS

The tax shall be collected at the rate of 0.1 % of the sale consideration exceeding Rs. 50 lakhs. However, if the individual fails to furnish an Aadhar or pan card the tax shall be collected at 1% ( 0.75% till 31.
03.2021)

 

PENALTY

If the business or an individual fails to collect or fails to pay the amount of TCS on the due date he shall be liable to pay interest up to 1% for every month or part thereof till the fault continues.

Authored by CA Ganesh Jagtap

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Category Income Tax, Other Articles by - Shivam from Taxblock 



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