TDS on Purchase of Goods 194Q:- The Finance Bill 2021 has introduced a new provision Section 194Q in Income Tax Act. According to provision 194Q, TDS has to be deducted in case of purchase of goods. For more information on Section 194Q and its implications on buyers and sellers please read below full article on “TDS on purchase of Goods”.
Applicability of TDS on purchase of Goods 194Q:- TDS on purchase of goods is applies buyers who are responsible for any sum payment to resident seller in respect for purchase of any goods. TDS to be deducted on payment made to resident seller. If a buyer imports goods then section 194Q will not be applicable. The provision of section 194Q also does not apply if fully income (not only part of income) of resident seller is exempt from Income tax under the Act (Like persons exempt under section 10) or under any other act passed by parliament.
The provision of section 194Q also does not apply to a non-resident buyer whose purchase goods from resident seller and such purchase does not effectively connected with the permanent establishment of such non-resident in India.
Condition for applicability of 194Q:- TDS on purchase of goods will be applies only those buyers whose total sale or gross receipt or turnover exceeding INR 10 crores in preceding financial year. For example if turnover of a buyer from business carried on by him is more than 10 cr in F.Y. 2019-20 then this section will be applicable from F.Y. 2020-21. However, non-business activity turnover or receipts should not be consider for this purpose.
TDS on purchase of Goods 194Q does not apply to a buyer in the year of incorporation since in this case condition of turnover of preceding financial year does not satisfied in the year of incorporation.
Time of deduction: – TDS to be deducted at the time of credit of such sum to the account of the seller or at the time of payment to the seller whichever is earlier.
Rate of TDS under Section 194Q:- Buyer will be liable to deduct TDS at the rate of 0.1% of sale consideration. TDS shall be deducted on sale consideration exceeding INR 50 Lakh from a single vender in the same financial year.
In case, where seller does not provide PAN or Aadhar then buyer would be liable to deduct TDS at the rate of 5%.
Examples:-
| Particular | Case – 1 | Case – 2 | Case – 3 | Case – 4 |
| Turnover of buyer in preceding F.Y. | 15 Cr | 20 Cr | 8 Cr | 14 Cr |
| Purchase Value or Consideration | 60 Lakh | 8 Lakh | 20 Lakh | 70 Lakh |
| TDS Liability on Buyer | Yes | No | No | Yes |
| Taxable Value | 10 Lakh | Nil | Nil | 20 Lakh |
| Pan Available | Yes | NA | NA | No |
| Rate of TDS | 0.10% | NA | NA | 5% |
Adjustment for GST:- When TDS is deducted at the time credit of amount in the account of seller and component of GST is indicated separately then TDS shall be deducted on the amount credited without including GST. However, if TDS is deducted on payment basis then TDS would be deducted on the whole amount.
Adjustment for Purchase Return:- TDS on purchase of Goods 194Q is require to be deducted at the time of credit or payment, whichever is earlier. Buyers already deducted TDS on purchase before purchase return. In case of purchase return, If money is refunded by the seller then tax deducted may be adjusted against the next purchase against the same seller. In case purchase return is replaced by the goods by the seller then no adjustment is required.
Non applicability of section 194Q:- TDS on purchase of Goods194Q will not be applicable in following cases.
- Tax is deductible under any other provision of Income tax Act.
- Tax is collectible under the provisions of section 206C except TCS on sale of Goods.
- Transaction in securities and commodities which are traded through recognized stock exchange or cleared and settled by the recognized clearing corporation.
- Transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchange.
- If e-commerce operator deducts tax under section 194O on a particular transaction then that transaction shall not be subjected to tax deduction under section 194Q of the Act.
Due date for TDS deposit:- TDS on purchase of goods 194Q shall be deposited with government by 7th day of subsequent month.
TDS Return:- Buyer should fill TDS return in Form 26Q. After filing TDS return in form 26Q, buyer should issue form 16A to seller in respect in respect of TDS deducted on purchase of goods from seller.
Also See, “Assessments under GST“
Read Also, “OIDAR Services under GST
Also See, “Tax Exemptions for Startups“
Text of Section 194Q is being reproduced below:
194Q. (1) 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.
Explanation.—For the purposes of this sub-section, “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, not being a person, as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.
(2) Where any sum referred to in sub-section (1) is credited to any account, whether called “suspense account” or by any other name, in the books of account of the person liable to pay such income, such credit of income shall be deemed to be the credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
(3) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty.
(4) Every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and the person liable to deduct tax.
(5) The provisions of this section shall not apply to a transaction on which—
(a) tax is deductible under any of the provisions of this Act; and
(b) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies.
Also See, “Guidelines under Section 194Q of the Income Tax Act 1961”
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