Let's say we have a party to which we made advance payment of around 61,20,000 and there has been no purchase till yesterday and the advance payment was made partly during may and June.
When the TDS should be deducted cause there was no purchase and the TDS should be deducted on the taxable value.
How to determine TDS in this case
Identify the Nature of the Payment: The payment made is an advance payment for a party, which suggests it is relate to a service or event.
Determine the applicability of TDS: tds is applicable on certain payments as per the Income tax act, 1961. For services, TDS is usually applicable under section 194J if the payment exceeds Rs.30,000/- in a financial year.
Calculate the taxable value: Since the advance payment was made partly during May and June and there's been no purchase till yesterday, we need to establish if the payment is taxable.
Given the scenario, let's assume the payment is for a service that would be rendered in the future.
Apply the tds rate: The TDS rate for services under section 194J is 10% of the taxable value. However, this rate can vary based on the type of service and the receipient's status (resident or non-resident).
Consider the threshold limit: TDS is applicable only if the payment or the aggregate of payments made to a person during the financial year exceeds Rs.30,000/-
Calculation:
TDS = 10% of Rs.61,20,000 =
0.10 X 61,20,000 = Rs.6,12,000
Under Section 194Q, TDS applies on the amount exceeding Rs 50 lakh from a single seller in a financial year. Advance payments made before hitting that mark do not require deduction. Once cumulative purchases from that supplier cross Rs 50 lakh, deduct TDS at 0.1% on every rupee above the threshold going forward. This obligation only arises if your own turnover in the preceding financial year was above Rs 10 crore. All 194Q specifics are covered in our [TDS rate chart for FY 2026-27](https://taxgarden.in/blog/tds-rate-chart-2026-to-2027) with updated thresholds.
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