The Finance Act, 2021 has introduced new section 194Q which is effective from 1st July 2021. The provisions of new section 194Q require the specified buyer to deduct TDS on the purchase of goods from the resident seller.
The present article covers briefing of provisions of section 194Q; explanation of the term ‘buyer’; time of TDS deduction; rate of TDS deduction; exemption available under section 194Q of the Income Tax Act; other important points and relative examples.
Page Contents
- Provisions relating to deduction of TDS on purchase of goods under Section 194Q
- Time of tax deduction on the purchase of goods under Section 194Q
- Rate of TDS deduction under Section 194Q
- The effective date of applicability of provisions of Section 194Q
- Exemption available under section 194Q-
- Other important points related to Section 194Q
- Examples relating to section 194Q–
Provisions relating to deduction of TDS on purchase of goods under Section 194Q
As per provisions of section 194Q of the Income Tax Act, TDS is deductible if-
- The buyer is responsible for making payment of a sum to the resident seller; and
- Such payment is to be done for the purchase of goods of the value/ aggregate of the value exceeding INR 50 Lakhs.
Explanation of the term ‘buyer’-
As per explanation to section 194Q, the term ‘buyer’ means as under-
- A person having total sales/ gross receipts/ turnover exceeding INR 10 Crores in the immediately preceding Financial Year in which the specified purchase of goods took place;
- Buyer will not include anyperson notified by the Central Government.
Time of tax deduction on the purchase of goods under Section 194Q
TDS on purchase of goods is to be deducted by the buyer within earlier of the following dates-
- At the time of credit of the sum into the account of the seller; or
- At the time of payment of the sum thereof.
Rate of TDS deduction under Section 194Q
The buyer is liable to deduct TDS at the rate of 0.1% of the purchase value above INR 50 Lakhs.
However, in case the Permanent Account Number (PAN) of the seller is not available. Then, the buyer would be liable to deduct tax @5%.
The effective date of applicability of provisions of Section 194Q
The provisions introduced vide section 194Q will be effective from 1st July 2021.
Exemption available under section 194Q-
TDS provisions covered under section 194Q are not applicable under the following cases-
- Transactions on which TDS is already deductible under other provisions of the Income Tax Act; or
- Transactions on which TCS is collectable as per provisions of section 206C [other than a transaction on which TCS is collectable under section 206C(1H)].
Some of the important points relating to TDS deductible on purchase of goods are summarized hereunder-
- TDS is also deductible under section 194Q against any amount credited to ‘suspense account’ or any other account under the books of accounts of the person liable to make payment of such income.
- Transactions, wherein, TDS is deductible under both the provisions i.e., section 206C(1H) and section 194Q. Under such cases, TDS would be deductible only under section 194Q.
- Provisions of section 194Q are not applicable when the seller is a non-resident.
- In case the buyer fails to comply with the tax deduction provisions covered under section 194Q. Then, as per the provision of section 40a(ia), there would be disallowance of expenditure up to 30% of the value of the transaction.
- As not specifically mentioned, provisions of section 194Q apply to the purchase of both the types of goods i.e. capital as well as revenue.
Examples relating to section 194Q–
Example 1 –
Mr. A, a buyer, having a total turnover of INR 50 Crores. Mr. A purchases goods from Mr. B, a seller, worth INR 52 Lakhs.
Analysis of applicability of section 194Q in the given transaction is narrated hereunder-
- Since buyer’s turnover is above INR 10 Crores, provisions of section 194Q get applicable.
- Further, the buyer has purchased goods having a value of more than INR 50 Lakhs.
- TDS under section 194Q will be deductible by the buyer in the following manner-
| Particulars | Amount |
| Taxable amount (INR 52 Lakhs – INR 50 Lakhs) | INR 2 Lakhs |
| Rate at which TDS deductible under section 194Q | 0.1% |
| Amount of TDS deductible | INR 200 |
Example 2 –
Mr. X, a buyer, is having gross receipts of INR 40 Crores. Mr. X buys goods from Mr. Y worth INR 60 Lakhs. Notably, Mr. Y, a seller, is having a turnover of INR 15 Crores.
Applicability of provisions of section 194Q in the above transaction is narrated hereunder-
- Provisions of section 194Q get attracted as the buyer is having gross receipts above INR 10 Crores.
- However, provisions of section 206C(1H) also get applicable as a seller is having a turnover above INR 10 Crores.
- Applicability of TDS/ TCS provisions are analyzed hereunder-
Since both the provisions i.e., section 194Q and section 206C(1H) gets applicable. TDS would be deductible only under section 194Q as per the table below-
| Particulars | Amount |
| Taxable amount (INR 60 Lakhs – INR 50 Lakhs) | INR 10 Lakhs |
| Rate at which TDS deductible under section 194Q | 0.1% |
| Amount of TDS deductible | INR 1000 |
Author Bio
Sir,
Please confirm If we have TDS deducted on Purchase 194Q in.F.Y. 2022-23 , the same party purchase in April 2023 then TDS applicavle
Whether we have to deduct TDS U/s 194Q for the suppliers for whom we deducted TDS on purchase in PY 2021-22 without considering limit of Rs.50Lakhs for this FY 2022-23.ie, From the first bill itself to deduct TDS in FY 2022-23 or to Consider limit of Rs.50Lakhs for this FY… Please clarify in this regard..
As per section 206C(1H) sub-section shall not apply, if buyer is liable to deduct tax at source under any other provision of this act on goods purchased by him from the seller and has deducted such amount.
We will be able to know deduction only if he files return of tax and same is appearing in my 26AS.
If amount is not appearing in my 26AS than whether I am required to collect tax u/s 206C(1H) and pay interest also?
Dear Sir,
TDS applicable Inclusive GST for purchase of material more than 50,00,000/-
Reply as soon as possible
The amount should be excluding GST
Dear Sir,
As our turnover was more than 10 Cr in FY 2020-21 we were deducting TDS on purchases in FY 2021-22.
But in FY 2021-22 our turnover is reduced to less than 10 Cr. in this case we are eligible to deduct TDS on purchases in FY-2022-23 or not.
Please help sir.
Dharmvir Kumar
Dear Sir,
From 01-07-2021 to till date can we paid interest (1.50%* No Of Months Daley )also against Purchase of material exceeds Rs 50,00,000/-
Please confirmed the same
Dear sir,
in 194Q we have deducted as per the income tax act ,but where can we claim the amount .at time company income tax return
please suggest me
Whether a government department is liable to deduct tds for purchase. Like water supply department purchaseing pipes. Department is not having turn over
sir, my company sales in July-2021 is 61Lakh and our turnover is below 5 corer and our buyer turnover is under 10 corer so s/c 194Q is applicable if yes so how will be deduct TDS and how many % deducted TDS
Which Type of Tds return form applicable for Sec 194 Q
please confirm railway (government ) is also liable to deduct TDS U/s 194Q.
SIr,
Iam doing transport business turnover 10 cores above
monthly fuel expenditure above 1 core Sec 194q applicable
Sir how to deduct TDS 194Q sum of purchase of goods. On the value of the purchase or the payment to be made against the purchase. ?
plz sir clear the doubt .
Sir how to deduct TDS 194Q sum of purchase of goods. On the value of the purchase or the payment to be made against the purchase. ?
plz sir clear the doubt .
Sir, Whether 194 Q apply including VAT bill, now VAT is applicable also in Pipe line Natural GAS?
Please suggest.
\if we have a Prepayment of 50L , tax will be default O%, if i made Standard Invoice against Prepayment of 50L, what will be taxes happends?
system is taking 0.1% why?
Hi Sir, Please clarify me, for the purpose 194Q, do we need to consider the purchase from 01st April 2021 or from 01st July 2021?
Is Sec 194Q applicable on fuel and electricity payments. ?.
Sir,
suppose we have purchase good woth Rs 40 lacs during Apr’21~jun’21. and we have also procure Labour servcies form same vendor worth Rs, 10 Lacs (on which we are dudection TDS under sec 94C) …so what will be the amount of for Threshhold limit is it 40 Lacs or 50 Lacs???
194Q limit is only for Goods purchasing.
Do not link it with service.
For Material : TDS will be deducted only on the amount exceeding 50 Lakhs.
For Service : TDS will be deducted as per previous rule
Sir
our sales turnover for the fy 2020-21 is 8 crores.
we purchased goods from one particular seller is Rs.70 lacs.
pls. advice us – new tds sec 194q will applicable to us or not
No, TDS will be deducted only when a buyer has more than 10 cr turnover.
Dear Sir against 194Q agar hum purchase karte hai 5000000 se uper to tds basic pe deduct hoga ya gross pe.
What would be the solution in the following scenarios:
Case -1 – Seller is having Turnover greater than 10Cr, but buyer is not having Turnover greater than 10Cr, but the value of transaction is greater than 50Lacs, would the seller add TCS @0.1% in his invoice?
Case-2 – Seller is having Turnover less than 10Cr, but buyer is having Turnover greater than 10 Cr, value of transaction is greater than 50Lacs. So seller will not add TCS in invoice, but buyer will deduct TDS @0.1%?
Case-3 – Both Seller and Buyer do not have Turnover greater than 10Cr, but value of transaction is greater than 50Lacs. So none of the TDS/TCS provisions would be applicable?
I have a query regarding this prov. for buyer and seller .. that the t/o limit of amount exceeding rs. 10 cr is count for single business of buyers/sellers or for their all business cumulative t/o?
For eg. If Mr.A engaged in 3 different kind of business, say ..
1)oil t/o 5 cr.
2) medicine t/o 12 cr.
3) warehousing t/o 8 cr. In previous year.
Now s.194(Q) is applicable on all 3 business because Mr.A is sole proprietor of all 3 businesses or it applies on medicine business only?
One of the most horrible provision of TDS i have ever come across. Tax department has gone lunatic.
You are absolutely correct. I agree with you.
All this confusion statred since 1.10.20 with the new section on TCS on sales.
50 lakh limit on purchase to be consider as per purchase for FY 2020-21 or FY 2021-22
As per F.Y 2020-21
Is this provision applicable to commission agents in the mandies, Buys goods from agriculturist sells them for a commission without having any risk and rewards on such goods ?
If we consider the Mandi agent as buyer who have turnover of more than 10 crore then also, practically, there will be no cases where they would be purchasing agriculture produce of more than 50,00,000/- from a single farmer. Even if we consider that the purchase of agriculture produce from the single farmer amounts to more than 50 lakh then also it needs to considered that the income from agriculture produce is exempt. Though, the section 194Q does not make any difference between exempt and taxable income but it needs be understand that TDS is recovery mechanism and something which is not taxable cannot be asked to recovered. In my opinion, these commission agents are not liable to deduct TDS u/s 194Q.
(these views are for academic purpose, do not take decision on the basis of this. Take profession advice from your CA)
TDS provisions covered under section 194Q are not applicable under the following cases-
as above mentioned i agree with it.
Transactions on which TDS is already deductible under other provisions of the Income Tax Act; or
Transactions on which TCS is collectable as per provisions of section 206C [other than a transaction on which TCS is collectable under section 206C(1H)].
AS ABOVE MENTIONED I AGREE WITH IT.
Exemption available under section 194Q-
TDS provisions covered under section 194Q are not applicable under the following cases-
Transactions on which TDS is already deductible under other provisions of the Income Tax Act; or
Transactions on which TCS is collectable as per provisions of section 206C [other than a transaction on which TCS is collectable under section 206C(1H)]…
Exemption available under section 194Q-
TDS provisions covered under section 194Q are not applicable under the following cases-
AS ABOVE MENTIONED I AGREE WITH IT.
Transactions on which TDS is already deductible under other provisions of the Income Tax Act; or
Transactions on which TCS is collectable as per provisions of section 206C [other than a transaction on which TCS is collectable under section 206C(1H)].
My question is if buyer going to pay 20L in July against invoice of 80L received in April however he has paid 50L to the vendor from April to June then TDS under section 194Q would be applicable on the pending payment of 20L
Sir in our business we have purchased Rs.5.00Crs between 1st Apr 21 to till date. Both the supplier and purchaser had more than 10 crs. turnover in the previous year. Section 194(Q) is applicable from 1st July, My concern is, whether we have to deduct TDS after 50lacs of purchase from 1st July 2021 or have to deduct TDS on every purchase from 1st July onwards.
As per section 194Q,the limit of 50 lakhs is to checked on yearly basis i.e. for the previous year as a whole. Therefore, in your case, the limit of 50 lakhs has already been exceeded even before the effective date of applicability of section 194Q. Accordingly, all the purchases made after 01/07/2021, from that vendor, would be subjected to TDS u/s 194Q. Needless to say that no TDS is required to be deducted on the purchase made before this date even if it exceeds 50 lakhs.
I think that 194Q provisions is applicable if the supplier not shown the tcs in his invoice under section 206C(1H). Both the section provisions are not applicable at a time.If wrong please correct.
Sir, in case of conflict between194Q and 206C(1H) i.e. where both the sections are applicable to a transaction then the provision of section 194Q prevail. Reference: Memorandum to FB 2021 ” If on a transaction
TCS is required under sub-section (1H) of section 206C as well as TDS under this
section, then on that transaction only TDS under this section shall be carried out” .
Sir,
My organization had turnover of less than 10 Cr. in previous year, and if I have not received declaration from Buyer for TDS , whether I have to charge TCS on sale invoice. Please guide.
Dear sir,
Good Morning !
Please may Suggests that TDS on which amount will be deduct Basic or total value of Invoice
Thanks n regards
Ajay
without GST
What will be Invoice Value of which TDS will be deducted in case of Non GST Product i.e. for Petrol Diesel Basic or Invoice Value including VAT.
RAMESH AND RAKESH BOTH TURNOVER 10 CRORE EXCEED RAMESH SOLD TO RAKESH 1 CRORE 10 LAKH AND RAMESH PURCHASE FROM RAKESH 51 LAKH. RAKEESH PAYMENT TO RAMESH 65 LAKH , AND RAMESH PAYMENT TO RAKESH 4 LAKH TDS AND TCS WHICH AMOUNT DEDUCTED
IF SELLER(HPCL OIL COMPANY) Has TURNOVER OF MORE THAN 10 CR AND PURCHASER (PETROL PUMP)TURNOVER IS MORE THAN 10Cr IN ALL FINANCIAL YEARS.PLS GIVE CALCULATION OF TDS U/S 194Q IFEACH PURCHSE INVOICE IS OF RS 15LAKH
If the seller is having Turnover greater than 10 crores and Transaction Value is over 50 lakhs, then the seller will not add TCS @ 0.1% in invoice, instead the buyer will make payment after deducting TDS @ 0.1%.
Is it correct to say so ?
Correct
section 194Q applicable for exempted goods purchase more then 50 lacs
Sir, It seems that 50 Lakh is the Threshold limit amount. TDS u/s 194Q will be applicable on overall above 50 Lakh.
Same rule, when we deduct TDS and apply rule considering threshold limit during normal case of Vendor’s invoicing. Would appreciate if you can review or study 194Q again and let us know. Thank you.
IF TURNOVER OF SALES IN FY:19-20 EXCEEDS 10 CRORES AND TURN OVER IN FY:20-21 REMAINS BELOW 10 CROR, SECTION 194Q SAYS IMMEDIATELY PRECEDING YEARS,
IN THAT CASE TDS OR TCS IS APPLICABLE ?
IT WOULD BE WHOSE LIABLITY IN TNE CASE WHERE I SUPPLY GOODS WORTH EXCEEDING 50LACS
We are a transport company we hire trucks from the market (brokers). We pay Truck Hire Charges to Truck Owners. Hire charges are 10,000 to 1,50,000
So in this 194Q section
1. Is there any exemption to transporters/service sector
2. Earlier there is a rule that if 1 truck owner owns 10+ vehicles then deduct TDS else not, with 194Q – this rule is no longer valid?
is section 194Q also applicable for Agriculture Produce Purchases from Farmer ?
Sir my Q is, the limit of 50 lac transaction will be counted only once or it will be figured every financial year ….suppose purchase of 50 lac limit crossed in FY 20-21 so in 21-22 again we have to count 50 lac in 21-22 or from the 20-21 year?
Is it single invoice for 50 lakhs in a single day or one financial year
One financial year
If it exceeds 50 lakh for overall transaction then need to deduct
Or in a single invoice if it exceeds 50 lakhs then need to deduct
Up to 50 lakhs exemption
Sir,
If value of goods is as follows-
Basic Value= Rs. 45,00,000/-
GST= Rs. 8,10,000/-
Total= Rs. 53,10,000/-
my Q-1= whether we are required to deduct TDS u/s 194Q
Q-2 = If yes then on which amount?
NO, TDS U/S 194Q WILL NOT BE APPLICABLE AS THE PAYMENT TO BE MADE TO SELLER IS BELOW 50 LACS
Basically tds provisions not applicable for gst.
Considering your case
Buyer pay 45 lakhs for the supplier
But gst for the govt by way of supplier
So it doesn’t exceed 50 lakhs.
If the buyer puchase goods for 6 lakhs as another invoice then we need to deduct tds u/s 194 Q for INR 1 lakh.
Respected Sir,
If buyer exceed turnover 10 Crore then TDS u/s 194Q will applicable on gross value of purchase OR total amount of purchase bill (i.e Gross Amount+ Freight+ GST) ?
On which amount will TDS applicable?
Sunil Kumr Ji, TCS will be applicable.
during the year 2020-2021 my company’s turnover is more than 10 crores. From one supplier we have purchsed goods for more than 50 lakhs in that period. But during the yer 2021-22, till now the purchase from the same supplier is only 10 lakhs, Shall i deduct tds when the purchase crosses 50 lakhs only ?
YES. TDS is required to be deducted if your payments for the purchase in a PY exceeds 50 lakh. Remember, even if your total purchase in a year amounts to 40 lakhs from a vendor but you have paid advance for the purchase to that vendor, say Rs. 20 lakh, tds is required to be deducted in that case on Rs. 10 lakh.
pl clarify the following scenario.
1) If B sells to A in N no of invoices each having value of 2.5 lakhs.Whether each invoice will be deducted @ 0.1% from the starting or once it crosses 50L limit.
2)Whether it is charged before GST or for the gross after GST.
Tds is deductible on amount exceeding Rs 50 Lacs, on the amount paid or credited which ever is earlier.
As per the earlier circular of CBDT, TDS is required to be deducted on Net amount. However, provision is asking to deduct the tds on credit of account which results in gross figure. Controversy is there till the time CBDT clarifies the same.
I HAVE DOUBT
MR A BUYER TURNOVER IS 9 CRORES , A PURCHASE FROM MR B SELLER RS. 55 LAKHS AND MR B SELLER TURNOVER IS 15 CRORES IN THAT CASE TCS APPLICABLE OR TDS APPLICABLE
Sunil Ji, TCS will be applicable.
if both the provisions i.e., section 194Q and section 206C(1H) gets applicable on same transaction then i think Section 206C(1H) gets applicable not Section 194Q. Is it correct?
The provision is clearly saying that 194Q will override 206C(1H)
Hardik Sir, does it mean that the seller will not add TCS @0.1% in his invoice and instead the buyer will deduct TDS @0.1% in the payment?
YES
if both the provisions i.e., section 194Q and section 206C(1H) gets applicable on same transaction then i think Section 206C(1H) gets applicable not Section 194Q
In most of transaction sales is accure fisrt, so section 206C(1H) is applicable
No sir, 194Q will prevail over 206C(1H). This has been clearly mentioned in memorandum explaining finance bill, 2021. Please Refer.