Budget 2021 proposes to introduce new Section 194Q.It would be effective from 01.07.2021.

Who is required to deduct TDS u/s 194Q:

Any person being a buyer who is responsible for paying any sum to any resident seller for purchase of any goods of the value of aggregate of value exceeding Rs 50 lakh in any previous year, shall deduct TDS at the time of payment or at the time of credit, whichever is earlier.


“Buyer” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed Rs 10cr during the Financial Year immediately preceding the Financial Year in which the purchase of goods is carried out.

Non applicability of the section:

The provisions of this section shall not apply to a transaction on which-

a) tax is deductible under any of the provisions of this Act &

b) tax is collectable u/s 206C(1H)

Rate at which TDS is require to be deduct:

Buyer is required to deduct TDS @0.1% of such sum exceeding 50 lakh.

Difference between 194Q & 206C(1H):

Particulars 194Q 206C(1H)
W.e.f 01.07.2021 01.10.2020
Purpose Tax deducted at Source Tax Collected at Source
Points/ Explanation  Turnover/gross receipts/ sales from the business of BUYER should exceed Rs 10cr. Turnover/gross receipts/sales from the business of SELLER should exceed Rs 10cr.
Timings of tax deduction Payment date or credit date whichever is earlier On receipt basis
Rates i) 0.1% (on amount exceeding Rs 50lakh)

ii) 5% (If PAN is not available)

i) 0.1(0.075% till 31.03.202)[on amount exceeding Rs 50lakh]

ii) 1% (If PAN is not available)

i)Transactions on which TDS is applicable under other provisions of the act
ii) Transactions on which TCS is applicable under 206C other than 206C(1H)
Transaction on which TDS/TCS is applicable under other provisions of the act and the same has been complied with (Meaning thereby; in a situation where TDS has been deducted u/s 194Q this section will not apply)


Buyer t/o Seller t/o Transaction Value Section applicable
5cr 11cr 55 lakh 206C(1H)
17cr 7cr 58 lakh 194Q
15cr 14cr  54 lakh 194Q
3cr 7cr 58 lakh  NA
15cr 18cr  45 lakh  NA

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April 2021