Quick Summary
Section 194Q of the Income Tax Act, which has been effective from 1st July 2021 onwards has created a lot of confusion among taxpayers and professionals. Thus, the Central Board of Direct Taxes viaCircular No. 13 of 2021 has issued certain guidelines and clarifications under the section. Read the official circular issued below: Circular No. 13 of 2021 F. No. 370142/26/2021-TPL Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes) Dated: 30th June,
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FAQ :
Section 194Q requires a buyer, whose total sales or turnover exceeds ₹10 crore in the preceding financial year, to deduct 0.1% of the purchase value as income tax (TDS) when buying goods from a resident seller, if the aggregate value of purchases exceeds ₹50 lakh in a financial year.
Section 194Q became effective from 1st July 2021.
No, transactions in securities and commodities traded through recognised stock exchanges or cleared by recognised clearing corporations are not subject to Section 194Q.
For the financial year 2021-22, the threshold calculation for Section 194Q begins from 1st April 2021. If payments or credits exceeding ₹50 lakh were made before 1st July 2021, TDS will apply to all subsequent payments or credits on or after 1st July 2021 to that seller.
Section 194Q does not apply to a non-resident buyer if their purchase of goods from an Indian resident is not effectively connected with their permanent establishment in India.
Yes, Section 194Q applies to advance payments made by the buyer to the seller, as the tax is deductible at the time of payment or credit, whichever is earlier.
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