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Section-194-Q-TDS-on-Purchase-of-Goods

 

Section 194-Q- TDS on Purchase of Goods

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Introduction-

This section is applicable from 01.07.2021 and provides for deduction of tax at source on the payment made by the assessee towards the purchase of goods. It is similar to section 206C(1H) which is applicable for collection of tax at source.



Applicability-
  • Resident Buyer for purchase of all goods of the value or aggregate value exceeding Rs.50 lakhs in a Financial Year.
  • Tax to be deducted at the earliest of the following dates-
    -time of credit of such sum to the account of the seller
    or
    -time of payment
means an assessee at the time of credit of such sum to the account of the seller or at the time of payment whichever is earlier (also covers advance payment) shall deduct an amount equal to 0.1% of sale consideration exceeding Rs. 50 Lakhs in a financial year.
  • Buyer mean a person whose total sales, gross receipts or turnover from the business carried on by him exceeded Rs. 10 crores during the financial year preceding the financial year in which the purchase of goods is carried out.


Example 1- (When Section 194Q is applicable)-

Gross Receipts/Total Turnover in Preceding Financial Year (in Crore)

Purchase of any goods of the value or aggregate of such value (in Lakhs)

Taxable Amount (in Lakhs)

Amount of TDS (If Pan is Available)

Amount of TDS (If Pan is not Available)

Seller

Buyer

 

 

 

 

8

15

60

10

0.1% of Rs. 10 Lakh i.e. Rs. 1,000

0.5% of Rs. 10 Lakh i.e. Rs. 5,000



Example 2- (When Section 194Q is not applicable)-

Gross Receipts/Total Turnover in Preceding Financial Year (in Crore)

Purchase of all goods of the value or aggregate of such value (in Lakhs)

Taxable Amount (in Lakhs)

Amount of TDS (If Pan is Available)

Amount of TDS (If Pan is not Available)

Seller

Buyer

 

 

 

 

15

8

60

0

Not Applicable (Buyer’s Turnover is less than 10 Crore)

Not Applicable (Buyer’s Turnover is less than 10 Crore)



Exemptions-
Provision of Section 194-Q shall not apply means no requirement of TDS u/s 194-Q on a transaction-
  • If tax is deductible at source under any other provisions or
  • If tax is collectible under the provisions of section 206C [excluding 206C(1H)]

 

To whom it is not applicable

The term 'buyer' would not include any person as may be specified by the Central Government by notification in the Official Gazette.


See the related post: How to E-file Income Tax Return

Due date for payment of TCS-

The person responsible for deducting tax shall deposit the TDS amount within 7 days from the last day of the month in which the tax was deducted.

 

Form of Return-

Tax deductor shall submit quarterly TDS return i.e., Form 26Q in respect of the tax deducted by him in a particular quarter.

 

Certificate to be issued-

Tax deductor issued to seller the certificate in the Form 16A, for the amount of tax deducted.

 

Other Points-
  • Tax to be deducted @ 5% if the seller does not provide PAN/Aadhar
  • Any sum credited to "suspense account" or by any other name in the books of account of the person liable to pay such sum (read as buyer), is covered and such credit shall be deemed to be the credit to the account of the payee and hence the provision would apply.
  • 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.
  • It is clarified that if on a transaction TCS is required under section 206C(1H) as well as TDS under section 194Q, then in respect of that transaction only TDS under section 194Q shall only be carried out means-

    -On a given transaction either TDS u/s 194Q will apply or TCS u/s 206C(1H) will apply

    -Both TDS u/s 194Q and TCS u/s 206C(1H) will not apply on the same transaction



Examples to understand whether section 194Q applicable or Not Applicable-

Turnover in Preceding Financial Year (in Crore)

Receipt/Payment for Sale or Purchase of Goods in the previous year (in Lakhs)

Taxable Amount (in Lakhs)

Section 194Q Applicable/Not Applicable

Seller

Buyer

 

 

 

18

8

60

0

Not Applicable (Buyer’s Turnover is less than 10 Crore)

18

12

60

10

Applicable (Buyer’s Turnover is more than Rs. 10 Crores)

 

8

8

60

0

Not Applicable (Buyer’s Turnover is less than 10 Crore)

8

18

60

10

Applicable (Buyer’s Turnover is more than 10 Crore)




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