pri TDS on Purchase of Goods | Section 194Q | Income Tax Act, 1961 TDS on Purchase of Goods | Section 194Q | Income Tax Act, 1961

Finance Act 2021 has introduced a new section on TDS – Section 194Q (TDS on purchase of goods), which will be coming in effect from 1st July 2021. In October 2020 the new provision on TCS (Section 206C 1H-TDS on sale of goods) was introduced, now a similar provision (sec. 194Q) is introduced to cover the uncovered part of dealings of goods.

As per sec.194Q – A person is liable to deduct TDS, if-

  • His(buyer) total turnover during last year exceeds Rs. 10 crore and
  • Buyer purchase of goods of value aggregating Rs. 50 lakhs and
  • Purchase is made from Resident supplier.

As per sec. 194Q – Rate of the TDS is 0.1% of total value of transaction. In case PAN of the supplier is not provided than TDS @5% will be deducted.

Time limit for deducting the TDS is earlier of payment or credit of seller’s account. In case buyer is fail to deduct TDS as per the provision of Section 194Q, then 30% of the expenditure will be disallowed.

Cases when TDS u/s 194Q is not deductible:

  • If TDS is deductible under any other provision or
  • TCS is collectable u/s 206C {excluding 206C(1H)}.

As per clarification given by Memorandum to Finance Act 2021, in case of where both provision TDS u/s 194Q and TCS u/s 206C (1H) is applicable then TDS u/s 194Q will be deducted. If buyer & seller both fulfilled the criteria for applicability of section 194Q & 206C(1H), then primary responsibility to deduct the TDS in this case is of buyer. Any failure on the part of buyer to deduct TDS will make the seller liable to for TCS.

Conclusion: Provision of section 194Q deals with TDS deductible on purchase of goods as similar to the section 206C (1H) – TCS on sale of goods. Section 194Q would prevail over 206C(1H), means that if TDS is deduced as per 194Q then TCS as per 206C(1H) will not be collected.

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One Comment

  1. JOTHI says:

    Sir, please clarify, that provision of sec 194Q and 206C(1H), As said the primary responsibility is buyers, What I am asking, in the case, seller’s can raised invoice first, if apply for TCS, than how can buyers is primary responsibility for deducting TDS …

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