prpri TDS on purchase of Goods under section 194Q from 01.07.2021 TDS on purchase of Goods under section 194Q from 01.07.2021

TDS on purchase of Goods under section 194Q from 01.07.2021 introduced by Finance Act 2021

Provision relating to deduction of TDS :-

Any person, being a buyer who is responsible for paying any sum to any resident seller for the purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year shall deduct TDS 0.1 percent of such sum exceeding fifty lakh rupees as income-tax.

Point of Deduction;-

  • 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

Definition of the Buyer:

  • “Buyer” means a person whose total sales, gross receipts, or turnover from the business carried on by him exceed 10 crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out.

For Example, If Mr. X purchases goods during F.Y 2021-22 then the threshold of Rs 10 crore shall be checked for F.Y 2020-21.

  • Buyer shall not include the person notified by the central government, subject to such conditions as may be specified.

Non Applicability:-

  • 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 subsection (1H) of section 206C

Conclusion:-

The above section shall be attracted if both the condition has to be satisfied cumulatively:-

  • Total sales, gross receipts, or turnover from the business carried on by Buyer exceed 10 crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out.

AND

  • Purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees

Consequences in case of non-compliances:-

If the buyer fails to comply with the above-mentioned provisions then the following no consequences will follow:-

1. He shall be considered as “Assessee in Default”

2. Levied penalty for non-compliance of TDS Provisions under section 201A

3. Disallowance of Expenditure @ 30%.

4. Interest on late payment and the late fee will be charged in case of delay

Note:-In case the seller does not furnish his Pan then the rate shall be 5 %.

Other Points relating to section 194 Q:-

  • 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.

Some Example for better understanding of Section 194Q:-

Example no 1

Mr. Ram (Buyer) Purchases Goods worth Rs 80,00,000/-as on 31.07.2021 from Mr. Shyam (Seller). Turnover of Mr. Ram was Rs 10 Crore During the F.Y 2020-21.

Since the turnover of Mr. Ram being a buyer during the F.Y 2020-21 was up to Rs 10 Crore hence this Section does not get attracted – No TDS shall be deducted

Example no 2 –

Mr. Ram (Buyer) Purchases Goods worth Rs 80 Lakhs-as on 31.07.2021 from Mr. Shyam (Seller). Turnover of Mr. Ram was Rs 11 Crore During the F.Y 2020-21.

Since the turnover of Mr. Ram being a buyer during the F.Y 2020-21 was above Rs 10 Crore hence this Section gets attracted – The TDS shall be deducted @ 0.1% on Rs 30 Lakhs (80 Lakh-50 Lakh) since both the conditions has been satisfied.

Example no 3 –

Mr. Ram (Buyer) Purchases Goods worth Rs 80 Lakhs as on 31.07.2021 from Mr. Shyam (Seller). Turnover of Mr. Ram was Rs 11 Crore During the F.Y 2020-21 and also turnover Mr. Shyam was Rs 25 Crore during the F.Y 2020-21

Since the turnover of Mr. Ram and Shyam was more than 10 Crores during preceding F.Y 2020-21. hence provisions of both the section (i.e section 194 Q and Section 206C(1H)) will get attracted –TDS will be deducted under section 194Q Only as per provisions of Income Tax Act.

Example no 4 –

Mr. Ram (Buyer) Purchases Goods worth Rs 49 Lakhs as on 31.07.2021 from Mr. Shyam (Seller). Turnover of Mr. Ram was Rs 11 Crore During the F.Y 2020-21.

Since the Turnover of Preceding F.Y was more than 10 Crore of Mr. Ram but the purchase of goods does not exceed 50 Lakhs during 2021-22 hence No TDS shall be deducted.

Example no 5 –

Mr. Ram (Buyer) Purchases Goods worth Rs 49 Lakhs as on 31.07.2021 from Mr. Shyam (Seller). Turnover of Mr. Ram was Rs 11 Crore During the F.Y 2020-21 and also turnover Mr. Shyam was Rs 25 Crore during the F.Y 2020-21

Since the Turnover of Preceding F.Y was more than 10 Crore of Mr. Ram but the purchase of goods does not exceed 50 Lakhs during 2021-22 hence No TDS shall be deducted under section 194Q irrespective of the turnover of buyer or seller exceeds Rs 10 Crores during 2021-22

Author Bio

Qualification: CA in Practice
Company: Neeraj Gupta & Associates
Location: Rath , Uttar Pradesh, India
Member Since: 20 Jun 2021 | Total Posts: 2

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7 Comments

  1. MEGHRAJ JAGIRDAR says:

    What if the turnover of Buyer is less than 10 crore and is buying material is excess of 50 lakhs ? If this section does not hold good, will TCS be charged as usual ?

  2. RAJINDER KUMAR SHARMA says:

    Sir, plz clarify me, its mandatory that for 194 Q section , its must that both buyer and seller sales should be more than 10 crore in 2020-2021, otherwise no tds will be deducted, its a big confusion plz correct it .

    1. CA Neeraj Kumar Gupta says:

      Dear Rajinder Kumar Sharma ji for applicability of section 194 q we have to check turnover of buyer only and not for seller if condition cumulatively satisfied i.e turnover of Rs more than 10 crore of buyer and sale more than 50 lakh during current year then this section be should be applied.
      Thanks

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