TDS on Purchase of Goods

Provision:-

Government inserted new TDS Section 194Q which will be effective from 01-July-2021, which say Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent. of such sum exceeding fifty lakh rupees as income-tax. 

Why it was required?

Last year government implemented TCS provision for Seller on Receipt of Sales of Goods, more than Rs. 50 Lakhs as sale consideration, during the current financial year. The TCS is payable on the amount of receipt which is greater than 50 Lakhs and received after 1st. Oct. 2020. The rate of TCS is 0.1% and Due to COVID-19 Pandemic Rate of TCS reduce by 25 % until 31 March 2021 and its effective rate is 0.075%. Other Condition for its applicability was “seller” means a person 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 sale of goods is carried out.

There were instances where Seller Turnover is less than 10 Crore but his receipt from sales of goods to particular buyer exceeding Rs.50 Lakhs. Therefore, there was no liability of TCS on seller. To handle this situation Government come up with similar type of provision for Purchaser (Buyer) via TDS applicability.

Decoding of Provision:-   

  • “Buyer” means a person 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.
  • In case Seller provided PAN card details, Rate will be 0.1% otherwise it will deducted @5 % as per Sec206 AA.
  • TDS Amount will be deduct by buyer on paying sum exceeding Rs.50 Lakhs for purchase of goods in any previous year.
  • Amount will be deducted on earlier of following:-
    • Payment Date
    • Credit of such sum to the account of the seller
  • The provisions of this section shall not apply to a transaction in following cases:-
    • tax is deductible under any of the provisions of this Act; and
    • tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies(TCS).
  • As per Exclusion provision under Sec194Q, TCS and TDS both will applicable in case of exchange of amount between Seller and Buyer, exceeding Rs.50 Lakhs, in any previous year. But this is been covered under Sec206C (1H), which specify that “Provided further that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount”.

Illustration:-

Seller Turn-over (In Crore)
Buyer Turn-over (In Crore)
Receipt or Payment for sale  or purchase of Goods in prev-ious year (In Lakhs)
Amt. on which tax will be calcul-ated
Seller PAN
Buyer PAN
TDS
TCS
Liable Person
Section under IT Act
Exclu-sion Section
Reason
9
12
54
4
Available
N/A
Yes @0.1%
N/A
Buyer
194Q
Out of scope of Sec 206C (1H)
Seller Turnover less than 10 Cr.
14
8
57
7
N/A
Available
N/A
Yes @0.1%
Seller
206C(1H)
Out of scope of Sec 194Q
Buyer  Turnover less than 10 Cr.
13
14
62
12
Available
Available
Yes @0.1%
N/A
Buyer
194Q
Out of scope of Sec 206C (1H)
Exclusion Provided under Sec 206C(1H)
9
12
54
4
Not Available
N/A
Yes @5%
N/A
Buyer
194Q/ 206AA
Out of scope of Sec 206C (1H)
Seller Turnover less than 10 Cr.
14
8
57
7
N/A
Not Available
N/A
Yes @1%
Seller
206C(1H) / 206AA
Out of scope of Sec 194Q
Buyer  Turnover less than 10 Cr.

Author Bio

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Whatsapp

taxguru on whatsapp GROUP LINK

Join us on Telegram

taxguru on telegram GROUP LINK

Review us on Google

More Under Income Tax

34 Comments

  1. SHASHI RANJAN SHARMA says:

    (HI SIR), (THIS IS SHASHI,)WE PURCHASE GOODS MORE THAN 50 LAKS . PARTY GIVEN ONE BILL MORE THAN 50 LACS ,
    CAN WE DEDUTCT TDS ON THIS BILL

    1. Kalpana says:

      If previous year turnover applicable any supplier for tds u/s 94Q then current year which criteria applicable to this supplier first bill or after crossing 50 lakhs purchases

  2. LAKSHAY INTERNATIONAL says:

    Sir,
    We have not deduct tds above 50 lakh of pspcl bill bur pspcl deduct tcs in pspcl bill so we need to deduct tds or not?

  3. krishna bihari jha says:

    For calculation of deductible Rs. 50 Lac, which amount should be considered? Should it be inclusive of GST amount or exclusive? Please clarify it

  4. Anil verma says:

    My flat is 62 lacs so i need to deduct pay 1% that is 62000 and pay the same as tds. Now the proerty is in joint name husband ,wife but payment is from my husband name . Shall we select buyer more than one or not . However seler is one

  5. CA Shivangi Goyal says:

    Sir, for the purpose of calculating 50lacs threshold (not deducting) for 194Q, should I include GST component as well?
    Example: Sales Taxable Value= 45lacs, GST=8.1lacs; Total sales value= 53.1lacs.
    Should I deduct TDS u/s 194Q or not?

    1. CA KALWANI says:

      Dear CA Shivangi Goyal, Definition of Turnover not specified in Sec 194Q. In that case, reference is required to be taken from Sec 44AD which implies “Gross revenue receipts from sale of goods and services”. So, turnover is inclusive of GST. Hence for Sec 194Q also, we need to consider GST value in Turnover Calculation.

    2. Sahil kumar says:

      Dear Shivangi
      If you received invoice exceed Rs.50,00,000 first from supplier when you are liable to deduct tds on taxable amount.
      If you pay first amount to supplier exceed 50,00,00 when you are liable to pay tds on gross amount.
      After 01.07.2021
      Understand.
      If not then
      contact us
      [email protected]

  6. kannan says:

    our company turnover F.Y 2019-20 Rs. 11.00 Cr and Last Financial Year Turnover (2020 – 21) Rs 4.30 Cr only. This section is applicable or not for our consorn.

  7. payal says:

    what if being a Buyer of good have turnover more than 10 crore but buying of goods from particular party does not exceeds 50 lacs. then in this case TCS will apply ? if yes than do buyer need to give declaration ?
    if yes than do buyer need to specify that buying limit is below 50lacs?

    1. Sahil kumar says:

      Dear payal,
      In that case, if buyer turnover FY 2020-2021 is above 1,00,00,000 cr when Seller cannot liable to deduct tcs
      Suppose, if buyer cannot purchase any good from supplier FY 21-22 when is not a mean that supplier deduct tcs understand or not …?

  8. Reddy Padmaja Koneni says:

    If both seller’s and buyer’s turnover is less than 10 crores and receipts in the previous year exceeds 50 lakhs…then is this provision applicable sir?

  9. Jatin Jhaveri says:

    What is mean by total sales for 10 crore limit?
    1. Only Gross sales with gst.
    2. Gross sales – sales returns with gst.
    3 Gross sales – sales return without gst

  10. BABLU RAMESH MANDAL says:

    Dear sir,

    If Seller is already deducting tcs from April onwards …as Sec 194Q Comes into affect from 1st July….so From 1st July the buyer will deduct tds u/s 194Q & seller will stop collecting Tcs …is it so? Pls clarify ??

  11. KOTHA RAKESH KUMAR says:

    RESPECTED SIR,
    MY PURCHASE HAS EXCEEDED 50LAKHS IN APRIL’2021 AND SELLERS HAD DEDUCTED TCS U/s206(1H) AND OUR TURNOVER ALSO EXCEEDED ABOVE 10Cr. IN LAST YEAR
    IN THIS REGARD 194Q SECTION APPLICABLE OR TO BE CONTINUE DEDUCT U/s 206(1H)
    PLEASE SEND THIS MY MAIL FOR WHICH I SHALL BE THANK TO YOU SIR

  12. KRISHNA MURTHY S R says:

    .10% need to be deducted on every payment made or once at the end of month on the whole amount paid during the month . if i pay ten times should i deduct ten times or one time?

  13. sachin maru says:

    Respected sir,

    if my purchase from a particular party exceeds 50 lakh from April 2021 itself than does i have to deduct tds u/s 194q @ 0.10% from April it self or i have to deduct tds from 1 July 2021
    and further Purchase transaction between 1 April to 30 June 2021 needs to consider or not
    please enlighten my knowledge on above case

    Regards
    CA SACHIN MARU

    1. CA Niraj Kumar Bhaiya says:

      Yes purchase transaction from 1-4-2021 need to be considered for calculating the threshold limit . But if purchase has exceeded the limit before june 2021 then tax has to be deducted on purchase made on or after 1st July 2021. So if threshold exceeded before 1st July then TDS u/s 194Q has to be deducted on all purchase made on or after 1st July 2021 not on purchase made before that even it has exceeded the limit . As the same query has arised for section 206C(1H) and the same has been clarified by the CBDT in its circular.

    2. CA Niraj Kumar Bhaiya says:

      Yes Purchase transaction from 1st April 2021 is to be considered for calculating threshold limit . Regarding your query if purchase transaction has exceeded the limit in April itself then tax has to be deducted on all purchase transaction made on or after 1st July 2021 , no TDS has to be deducted on purchase transaction between April to June 2021 even if it exceeded the threshold limit .

      As the same query has been raised on section 206C(1H) and the same has been clarified by CBDT in its circular.

      1. Trapti Agrawal says:

        Sir what will be the limit for next F.Y. I mean do we check this limit of purchase of 50 lakh. Every year or do we check it once in a lifetime for a buyer

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

August 2022
M T W T F S S
1234567
891011121314
15161718192021
22232425262728
293031