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In this blog, we will be discussing the concept of TDS (Tax Deducted at Source) on the purchase of goods under Section 194Q of the Income Tax Act, 1961.

Introduction

Section 194Q was introduced in the Union Budget 2021 and it applies to buyers who are purchasing goods worth more than Rs. 50 lakhs in a financial year. This section mandates the buyer to deduct TDS at the rate of 0.1% on the purchase of goods exceeding the threshold limit.

Who is liable to deduct TDS under Section 194Q?

The buyer is responsible for deducting TDS under Section 194Q. The buyer can be any person, including a company, a partnership firm, a sole proprietorship, a HUF, or any other person who is liable to make payment for the purchase of goods. However, the liability to deduct TDS does not apply to individuals or HUFs who are not subject to tax audit under Section 44AB of the Income Tax Act, 1961.

When is TDS to be deducted under Section 194Q?

TDS is to be deducted at the time of credit of the purchase amount to the seller's account or at the time of payment, whichever is earlier. The buyer is required to deduct TDS only if the purchase amount exceeds Rs. 50 lakhs in a financial year.

Rate of TDS under Section 194Q

The rate of TDS under Section 194Q is 0.1%. However, if the seller has not furnished his/her PAN, the TDS rate shall be 5%.

Threshold limit

The threshold limit for deducting TDS under Section 194Q is Rs. 50 lakhs in a financial year. If the total purchase amount does not exceed Rs. 50 lakhs, then TDS is not required to be deducted.

Exemption under Section 194Q

There are certain exemptions under Section 194Q, which are as follows:

1. If the seller is already subject to TDS under any other provision of the Income Tax Act, 1961, then TDS under Section 194Q is not required to be deducted.
2. If the seller is a resident individual and his/her aggregate turnover, including the sale of goods, services, or both, does not exceed Rs. 10 crores in the previous financial year, then TDS under Section 194Q is not required to be deducted.
3. If the seller is a Central or State Government, local authority, or any statutory body, then TDS under Section 194Q is not required to be deducted.

Conclusion

TDS on the purchase of goods under Section 194Q is a new provision introduced in the Income Tax Act, of 1961. It applies to buyers who purchase goods worth more than Rs. 50 lakhs in a financial year. The buyer is liable to deduct TDS at the rate of 0.1% on the purchase amount exceeding the threshold limit. However, there are certain exemptions under this section, which have been discussed above. It is important for buyers to comply with this provision to avoid any penalty or interest charges.

To know more about TDS under Section 194Q and other tax-related services, you can contact Alliance Tax Experts at info@alltaxfin.com or call them at 9769201316. They provide expert guidance and assistance on tax planning, compliance, and other financial services.

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