New Section 194Q - TDS on Purchase of GOODS

This section has been inserted by Finance Act 2021 which will be effective from 01-July-2021.

Applicability

Any person, being a buyer who is responsible for paying any sum to any resident 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-

“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.

Rate of TDS

• a) If seller provide PAN:- TDS rate will be 0.1% .
• b) If seller do not provide PAN:- TDS rate will be 5% .
• c) If seller hasn’t filed the ITR of two preceding PYs relevant to previous year in which tax is required to be deducted and the total of TDS & TCS is rupees Rs.50000/- or more in each of these two preceding PYs :- TDS rate will be 5%.

Time of deduction

TDS to be deducted on earlier of the following:

• i) Payment or
• ii) Credit of such sum to the account of seller

For the purpose of credit to the seller account, it includes credit of sum to any “suspense account” or by any other name.

Non applicability

• a) Purchase from a person other than Resident.
• b) When Value or aggregate value of purchase transaction is 50 Lakh or less than 50 lakh.
• c) Where turnover, gross receipts from business carried on by the buyer is 10Cr or less during the financial year immediately preceding the financial year in which the purchase of goods is carried out.
• d) tax is deductible under any of the provisions of this Act
• e) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies (TCS).
• f) Buyer is a person excluded from the provision for deduction of tax as notified by Central Government.

Comparison between 194Q & 206C(1H)