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194Q Vs.Purchase returns

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LAKSHMI KANTH

TAX CONSULTANT

449 Points Posted on 28 July 2021

194Q Vs purchase returns- clarification request
Dear Sir, with regard to Income Tax Circular vide no. 13 of 2021 dated 30th,June,2021, vide para 4.3.3: this para covers only two scenarios (1) purchase returns against which amount got refunded from the sellor and (2) replacement of goods against such purchase returns.

But 3rd scenario (which is not covered in the Circular I believe) is that as a purchaser I have a 60 days credit, hence, I make payment after 60 days. Therefore, I knew very well that the purchase returns made in month one, hence I am going to pay the amount after deducting the purchase returns, so Can I deduct TDS on net purchases ie. the purchase returns from the purchase of month one? Or Do I have to deduct TDS on the entire purchase amount.

Replies (2)

Quick Summary

This discussion seeks clarification on deducting TDS under Section 194Q when purchase returns are involved. Specifically, it questions whether TDS should be deducted on the net purchase amount after accounting for returns, especially when payment is made after the return period due to credit terms. The consensus suggests TDS should be deducted on the invoice value, with adjustments for excess deductions possible against future purchases from the same seller.

CMA Poornima Madhava

CMA

13117 Points Posted on 29 July 2021

Since Tax u/s 194Q to be deducted at source at the time of credit or payment whichever is earlier, you are required to deduct tax against the value as per invoice. If purchase return is recorded subsequently, excess deduction to this extent can be adjusted against future purchase from the same seller.