TDS on purchase of goods under Section 194Q
This new Section 194Q is proposed to be applicable from 1st July 2021.
Section 194Q of the Income Tax Act is recently introduced vide the Finance Act, 2021. Under section 194Q “It is provided for TDS by the person responsible for paying any sum to any resident for purchase of goods. The rate of TDS is kept very low at 0.1%. The tax is only required to be deducted by that person (i.e. ―buyer) whose total sales, gross receipts, or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out. Tax is required to be deducted by such person if the purchase of goods by him from the seller is of the value or aggregate of such value exceeding fifty lakh rupees in the previous year.”
As per charging proviso to this section, this is going to apply to any person being a buyer responsible for making a payment to a resident (Not applicable for Import Purchase from a supplier outside India) for purchase of goods (NA to services) when value or aggregate of purchase from a supplier or payment whichever is earlier Rs.50 lacs during the previous year. The transaction with any supplier with the addition of which your aggregate purchase/payment for a purchase from that supplier exceeds Rs.50 lacs, will be the transaction effective which TDS will have to be deducted @.10% of the Purchase transaction or payment thereof whichever is earlier.
This section will also apply to an assessee whose aggregate Turnover in the immediate previous year exceeds Rs.10 crore.
| Comparison of Sec 194Q and 206C(1H) of Income Tax Act, 1961 | |||
Particular |
194Q |
206C(1H) |
|
| Purpose | Tax to be DEDUCTED | Tax to be COLLECTED | |
| Applicable to | Buyer/Purchaser | Seller | |
| With effect from | 01/07/2021 | 01/10/2020 | |
| When Deducted or collected | Payment or credit, which ever is earlier | At the time of receipt | |
| Advances | TDS shall be deducted on advance payments made | TCS shall be collected on advance receipts | |
| Rate of TDS/TCS | 0.1% | 0.1% (0.075% for FY 2020-21) | |
| PAN not available | 5% | 1% | |
| Triggering point | Turnover/Gross Receipts/Sales from the business of BUYER should exceed Rs.10cr during previous year (Excluding GST) Purchase of goods of aggregate value exceeding Rs.50Lakhs in PY. (The value of goods includes GST) | Turover/Gross Receipts/Sales from the business of SELLER should exceed Rs.10cr during previous year (Excluding GST) Sale consideration received exceeds Rs.50Lakhs in PY. (The value of goods includes GST) | |
| When to deposit/collect | Tax so deducted shall be deposited with government by 7th day of subsequent month | Tax so collected shall be deposited with government by 7th day of subsequent month | |
| Quarterly statement to be filed | 26Q | 27EQ | |