Section 194Q has been inserted in the Income Tax Act, 1961 vide the Finance Act, 2021 which will be effective from 1 July 2021. It provides that certain buyer of goods is responsible for deduction of TDS on payment for purchases made by him.
Applicability:
- Turnover of the buyer of goods is more than INR 10 crores in the previous financial year;
- Buyer of goods (including capital goods) to deduct TDS on payment for purchases from any resident seller;
- Purchase value exceeds INR 50 lakhs;
Time of tax collection:
TDS to be deducted at a date which is earlier of the following:
- At the time of bill booking; or
- At the time of payment;
Rate of tax collection:
- PAN available: 0.1% on sum exceeding INR 50 lakhs
- PAN unavailable: 5% on sum exceeding INR 50 lakhs
Exclusions:
194Q does not apply where:
a. the buyer needs to deduct TDS under any other section of the Act; or
b. seller is collecting TCS u/s 206C (except 206C(1H) TCS on sale of goods)
Important Point:
- Since this section is applicable only when purchases are made from a resident seller, hence, no TDS shall be deducted in case of imports.
- If in case TDS or TCS is applicable on a transaction under some different section(s), then provisions of section 194Q shall not apply.
- If in case both sections 194Q and 206C(1H) (TCS on sale of goods) are applicable then in that case the provisions of section 194Q shall prevail.
