194Q TDS ON
PURCHASE OF GOODS
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Effective 1st July, 2021, Purchaser/Buyer of Goods shall deduct TDS @ 0.1% of an amount in excess of 50 lakhs paid to Resident Seller in any previous Year. Individual payment or aggregate payment in excess of 50 lakhs during any Previous Year, are both covered under this section.
"Buyer/Purchaser" means a person whose total sales, gross receipts or turnover exceeds 10 crore rupees during the immediately preceding financial year.
Point of Taxation: TDS shall be deducted:
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At the time of payment to Resident Seller, OR
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At the time of crediting such sum to the account of Seller.
- Whichever is earlier.
Note: Even if the amount is credited to any Suspense Account or any other name, TDS shall be deducted under this section.
Non-Applicability – The section is not applicable in the following cases:
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TDS deductible under any other sections AND
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TCS collectible under 206C other than 206C (1H)
TDS at higher Rate:
The Seller has to provide his Permanent Account Number(“PAN”) to the Buyer. If PAN is not provided then TDS shall be deducted at 5% as per section 206CC.
Example
Mr. A purchase Goods from Mr. B as follows:
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40 lakhs on 10th July, 2021
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20 lakhs on 30th July, 2021
A. Compute TDS u/s 194Q assuming Mr. A has turnover of 20 crore in FY 2021?
Solution
Mr. A will deduct TDS of INR 1,000 u/s 194Q
(TDS – 0.1% of 10 lakhs (60-50) = INR 1,000)
B. Assume Mr. B does not furnish his Permanent Account Number?
Solution
Mr. A will deduct TDS of INR 50,000 u/s 194Q read with section 206CC
(TDS – 5% of 10 lakhs (60-50) = INR 50,000)
Additional Key Points highlighted by Author for better understanding of the topic
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The section only covers Purchase of Goods. Procurement of Services are not covered.
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Purchasers could be any assessee such as Individual, HUF, Firm, Company etc.
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In case of Import of Goods where payment is made to Non-Resident, TDS under this section is not required. Only payment made to Resident Sellers are covered.
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In case both section 206C(1H) and 194Q is applicable, then first responsibility is for Buyer of Goods to deduct TDS u/s 194Q. If TDS is deducted by buyer, then seller need not collect TCS under section 206C(1H). If TDS is not deducted by Buyer, then 30% of amount shall be disallowed u/s 40a(ia). Also, seller has to collect TCS u/s 206C(1H) in that situation.