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.