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).
Exclusion
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
Please guide about how to determine exemption limit, suppose we make such payments to the party for RS 50 lakh from April to june . But we purchase Goods only for RS 45 lakh ,,on what basis we can determine exemption limit payment basis or purchase basis .please guide
Section 194Q shall apply on payment or credit whichever is earlier, the provision of this section shall apply to advance payment made by the buyer to the seller.
Hence it is clear that the exemption limit is based on the payment basis and apply even on advance payments.