prpri Provisions of Section 194Q of Income Tax Act 1961 Provisions of Section 194Q of Income Tax Act 1961

Income tax updates Newly Inserted Section 194Q

Section 194Q of the Income Tax Act is introduced vide the Finance Act, 2021, has come into effect from 01-07-2021.

The new section 194Q applies to any buyer who is responsible to pay for purchase of goods of the value or aggregate of value exceeding INR 50 Lakh in the Financial Year.

TDS at a rate of 0.1% has to be deducted at the time of credit or payment to the seller, whichever is earlier, (Note: TDS at a rate 5% in case of No PAN).


1. Services providers

2. Import purchase from a supplier outside India.

3. Seller whose income is exempt from Income tax (Like RBI, ADB Act. Ect.,).

4. Wherever TDS is applicable under any other section of Income Tax Act 1961.

5. Wherever TCS is applicable under section 206C(1H) of the Income Tax Act 1961.

Definition of Buyer

A person who’s gross receipts, total sales or turnover exceeds INR 10 Crore in the immediately preceding Financial Year. (Note: The threshold of INR 50Lakh shall be computed from 01-04-2021).

Adjustment for GST

The TDS shall be levied on the amount credited or payable to the seller excluding GST.

Non- Compliance of Section 194Q

If TDS as applicable above is not deducted or deducted but not remitted to the department, section 40a(ia) of the Income Tax Act provides for 30% dis-allowance of expenditure while computing the taxable income.

If Clash between TDS U/S 194Q & TCS U/S 206C(1H)

Buyer Seller Responsible
If Turnover/Gross receipts in the previous FY If Turnover/Gross receipts in the previous FY TDS/TCS
> INR 10 Crore < INR 10 Crore Buyer, TDS U/S 194Q
< INR 10 Crore > INR 10 Crore Seller, TCS U/S 206C(1H)
> INR 10 Crore > INR 10 Crore Buyer, TDS U/S 194Q

Author Bio

Qualification: CA in Practice
Company: J Narasimha & Associates
Location: Bengaluru, Karnataka, India
Member Since: 07 Jul 2021 | Total Posts: 1
Experienced Associate with a demonstrated history of working in the financial services. I am very passionate of working for clients of various fields of Accounting, Book Keeping, Direct or Indirect Taxation and International Taxation, Projects Reports, ESI, EPF & Professional Tax. MSME or Udy View Full Profile

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July 2021