Follow Us :

It would be the first moment in the history of income tax that TDS is levied on the procurement of products. Section 194Q of the Act would engage numerous transactions encompassing the acquisition of products under this umbrella.

In the Finance Act of 2021, the government added Section 194Q to the Income Tax Act of 1961. The government’s intention in enacting this law is to create a trail of high-value sales and purchases of products. There are several additional provisions that allow for the deduction of tax at source on various transactions; however, the deduction of tax on the sale of goods has been made relevant by introducing Section 194Q into the Income Tax Act of 1961.

New Regulations

According to the new provision – 194Q of the Income Tax Act, the buyer of the goods is obliged to deduct the TDS of the seller of the goods if the products purchased by the buyer from a specific seller have an annual value of Rs.50,00,000/- or more. This indicates that if you buy items from ‘X’ and your yearly purchases exceed Rs.50,00,000/-, you must deduct TDS on purchases above the Rs.50,00,000/- limit. This will take effect on July 1, 2021.

Who is obligated to deduct TDS?

Any individual (deductor) who purchases goods from another person (deductee) and the value of those goods exceeds Rs.50,00,000/- in a calendar year. However, the following individuals are not deductors and are not obligated to deduct TDS:

  • New business — This does not apply to the year the business is founded or incorporated.
  • Turnover limit – This will not apply to individuals who had a gross turnover of less than Rs. 10 crores in the year before the year in which items are purchased.
  • Non-resident — This does NOT apply to non-resident purchasers. However, if the buyer has a Permanent Establishment (PE) in India, this may apply.

What kind of transactions would be subject to this TDS?

This TDS is levied on transactions involving the acquisition of items worth more over Rs.50 lakhs. The following transactions, however, are NOT covered by this TDS:

1. Purchase deals worth less than Rs. 50 lakhs.

2. Securities and commodity transactions are conducted through recognised stock exchanges and clearing organisations.

3. Power exchanges facilitate the trading of electricity, renewable energy certificates, and energy-saving certificates.

4. Other sections of the Income Tax Act apply to transactions on which TDS is deducted.

Deductor turnover limit

The applicable turnover limit for these TDS provisions is Rs. 10 crores. This indicates that you must have total sales or gross revenues of Rs. 10 crores or more in the year before the buying transaction. If you have interest income, capital gains income, or rental revenue in a given year, they may be considered receipts, but they are not considered “business turnover”. A “business turnover” is required for these requirements to be applicable. As a result, until your business revenue exceeds Rs. 10 crores, you are not required to deduct tax on purchases of items.

TDS transaction limit

TDS on purchases of goods is levied only when the total amount of such transactions exceeds Rs. 50 lakhs in a calendar year. TDS is to be deducted on purchases above Rs. 50 lakhs. These rules are effective on 01/07/2021; however, if your transaction limit exceeded Rs.50 lakhs before 01/07/2021, you must begin TDS on 01/07/2021, since the transaction limitations will be applicable on a yearly basis, beginning on 01/04/2021. The following factors may be taken into account while calculating the Rs.50 lakh limit.

  • The amount of GST may be deducted from the total amount of bills paid.
  • If the amount is paid in advance or before crediting the purchasing party’s accounts in books of account, TDS may be needed on the entire amount, including GST, because it is not practicable to separate GST from the number of purchases.
  • TDS must be deducted on a payment basis in the event of advance payments because TDS is applicable at the time of crediting the amount in books or payment, whichever comes first.

TDS deposit rate and dates

TDS is levied at a rate of 0.1 per cent of the transaction value of items purchased in excess of Rs. 50 lakhs. If the deductee fails to provide his or her PAN to the deductor, this rate may be as high as 5%. TDS should be deducted when the purchases are credited to the seller’s account in the seller’s books of account. This is true even if the funds are credited to the suspense account.

TDS must be deposited on or before the 7th day of the month following the month in which TDS is deducted. TDS for the month of March, on the other hand, must be submitted on or before April 30th of the next fiscal year. TDS returns have the same due dates as other TDS requirements.

Section 194Q Synopsis

Section 194’s provision shall apply only if the following conditions are met:

  • The vendor of the products must be a resident of India.
  • The buyer of products shall be construed in accordance with the definition of Buyer stated in the explanation to Section 194Q.
  • In any previous year, the amount or sum of values must have exceeded 50 lakhs.
  • TDS will be levied at a rate of 0.1% on amounts in excess of 50 lakhs.
  • The requirements of this section do not apply if the transaction is subject to TDS and TCS under any other section of the Income Tax Act of 1961.
  • If provisions under Section 194Q and Section 206C (1H) attract at the same time, the provisions under Section 194Q take precedence.

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

28 Comments

  1. Roopa says:

    If purchase worth goods in FY 2021-22 is above 50 lakhs with party “AB”but in FY 2022-23 if the transactions are below 50 Lakhs with party “AB”, whether TDS 94-Q is applicable

  2. NIraj says:

    How can we calculate the threshold limit for the 50 Lakh? Which includes or excludes tax? For example, a purchase price of 531000 Include GST of 810000.
    Basic Value CGST 9% SGST 9% Total
    4500000 405000 405000 5310000

    What amount should be used to calculate the limit?

  3. Sejal Patel says:

    Sir my opening balance is as on 01/04/2022 2100000 then 03/04/2022 one purchase bill made amount is 2100000 , 04/04/2022 another one purchase bill made amount is 2100000 so my concern I have to Deduct TDS or Not??? Please reply

  4. ANIL KATURDE says:

    Sir, Our Concern’s sales turnover for the F.Y,20-21 Rs.2.68 Crores. and Running F.Y.2021-22 as on this date Rs.6.64 Crores. – Purchase from two suppliers more than 50 lakhs. May I Deduct TDS U/s/194Q

  5. chandan choudhary says:

    as per norms tcs applicable , Tcs must be deducted on a payment basis in the event of advance payments because TDS is applicable at the time of crediting the amount in books or payment, whichever comes first.

    But in case already outstanding amount related to previous year, we have already pay tcs on purchase in previous year.

    than we will deduct outstanding amount in current year payment or not.

  6. rohit says:

    We book purchase from ABC Vendor
    01.04.2022 to 30.06.2022 total purchase book 4800000/- now on 02.07.2022 one bill come with the amount of 400000/- so in the case in which amount i need ti ded TDS only on 400000 or in hole amount 5200000/- please help

  7. Subhabrata mukherjee says:

    Is limitation of turnover of 50 lakhs under sec.194 q applicable in every year or one time deduction.l
    am confused pl. reply.

  8. AKASH HARI says:

    being a purchase of goods, i going to deduct tds but i am confuse…whether i deduct tds on basic value or including gst. (invoice value)???

  9. M P GUPTA says:

    194Q OF IT ACT-PLEASE BRIEF HOW MUCH VALUE TO BE CONSIDERED FOR PURCHSE FOR TDS 0.1% UNDER THIS SECTION. GIVE ME ONE EXAMPLE FOR ITS.

  10. Anil Thakker says:

    Suppose a Bill for purchase of stasnory item and such other items of rs. Under 50000/- can we deduct the tds and at what rate?

  11. Mohammad Israr says:

    My Question is that If We Purchase Goods From Party in Previous That Is 21-22 and Deduted TDS On It As per Specified Rate . But in Current Year That Is FY2022-23 Can We Dedeuct TDS On bill From April 1 Bill or After Crossing 50lakh also In Current Year
    can any one clerfiy my doubt

  12. Ravi Dutt says:

    Dear Sir, If we are purchasing Goods and Software from same vendor and already deducting TDS @10% on software. whether we also deduct TDS u/s 194-Q if value is more than 50L

  13. OM SRI JAYAKUMAR says:

    Sir,
    Our Concern’s sales turnover for the F.Y,20-21 Rs.2.68 Crores. and Running F.Y.2021-22 as on this date Rs.6.64 Crores. – Purchase from two suppliers more than 50 lakhs. May I Deduct TDS U/s/194Q .

  14. ABDUL SATTAR says:

    THE MANUFACTURE COMPANY BUYS INK CATRIDGE FOR PRODUCTION PURPOSES WITH FREIGHT CHARGES, WHICH CAN BE APPLIED TO TDS 194Q, WE ARE RELEVANT TO THE TOTAL BASIC VALUE OF INVOICE INCLUDING FREIGHT, CAN YOU EXPLAIN TDS 194Q IN THIS CASE?

    1. RAMESH SHARMA says:

      TDS @ 0.1% WILL BE APPLLICABLE ON THE VALUE BAISC+FREIGHT EXCLUDING GST. GST CANNOT BE ADDED WHILE DEDUCTING THE TDS AS BECAUSE GST IS INDIRECT TAX AND GST CANNOT BE ADJUSTED OR PAID UNTIL IT IS COLLECTED

  15. Manoj Gupta says:

    On behalf of our customer we have arrange gift items and courier to the person as per list given by our customer.. Does any TDS deduction on the vendor’s invoice, if yes, in which section

  16. CA D K PATEL says:

    In the above article on TDS-194Q, pl clarify that whether a Trust (not having any business turnover) is liable to deduct tax on purchases exceeding Rs. 50 lakh from single seller.

Leave a Comment

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

Search Post by Date
May 2024
M T W T F S S
 12345
6789101112
13141516171819
20212223242526
2728293031