TDS Applicability on Electricity Charges U/s 194Q

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The discussion debated TDS applicability under Section 194Q on electricity charges. Some replies cited CBDT Circular 13/2021 stating 194Q does not apply to electricity transactions through power exchanges, while others argued electricity is goods and may attract TDS or TCS provisions.

SUDHEEP M

SUDHEEP M (Querist)
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24 March 2022 Sir,

Can you please clarify regarding the TDS Applicability under section 194Q in case electricity payments. I have currently received letter form the electricity board to deduct TDS if the total charges exceeds the threshold limit.
Our company have five branches and electricity liability for the financial year 2021-22 well exceeds the threshold limit of Rs. 50,00,000. But all the branched have rented building and electricity bill was in the name of building owner. Then I want to know whether the company was liable to deducted TDS?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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24 March 2022 Please note that as per Circular Number 13/2021 provisions of section 194Q are not applicable on Transaction in Electricity. A transaction in electricity can be undertaken either by way of direct purchase from the company engaged in generation of electricity or through power exchanges.

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CA Puja Sharma

CA Puja Sharma (Expert)
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24 March 2022 Yes in my opinion also, no need to deduct TDS on electricity charges u/s 194Q.

Refer to CBDT guideliness on 194Q - Circular No. 13 of 2021-Income Tax Dated: 30/06/2021

Purshotam Vohra

Purshotam Vohra (Expert)
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01 November 2022 TDS u/s194Q is applicable in case of electricity charges. CBDT circular clarifies in respect of electricity purchased through 'Power exchange' only and not otherwise.

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PARAS CHHAJED

PARAS CHHAJED (Expert)
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08 September 2023 Honourable Supreme Court in the case of State of A. P. v. National Thermal Power Corporation Ltd. (2002) 5 SCC 203/ 127 STC 280 (SC) has held that Electricity is Goods. Once it is goods provisioons of section 194Q and s. 206C(1H) would be attracted as the case may be having regard to turnover of assesse and amount of electricity purchase / sale. If the turnover of the assessee is less than 10 cr but payment or electricity purchase is more than 50 lacs in a year then the electricity company shall make TCS.

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