TDS On Purchase of Goods Under section 194Q
now we discuss all provisions of section 194Q and applicability
Clause 48 of Finance Bill 2021- Insertion of new section 194Q:
when deducting a TDS and what is the rate?
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. It is proposed to provide for TDS by a person responsible for paying any sum to any resident for the purchase of goods. The rate of TDS is kept very low at 0.1%.
TDS will be deducted on any sum paid over and above ₹50 Lakh in a financial year. This means TDS is not applicable on the whole amount but rather on any sum exceeding ₹50 Lakh only in a financial year.
Exception (TDS section 194Q does not apply)
- This section is not applicable to a person whose TDS is deductible under any other provision of the Act
- This section not applicable to a person whose TCS is deductible under any other provision of the Act, other than Sec 206C(1H)
- 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.
- 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
- Sec 194Q shall override sec 206C(1H) and hence in such a case only the buyer needs to deduct TDS and the seller need not to required deduct TDS under sec 206C(1H)
- If the seller does not provide his PAN, in that case, the buyer has to deduct TDS 5% as per the newly amended section 206AA of the Income Tax Act;
for example, Mr. Seller Sold goods to Mr. Buyer and collected TCS under sec 206C(1H), however, after applicability of Sec 194Q (1. July.2021) Mr. Buyer is covered by Sec 194Q. Since sec 194Q is an overriding section hence My Buyer shall be liable to deduct TDS under this section and Mr. Seller shall not require to collect TCS under sec 206C(1H).
- CBDT has clarified through Circular No. 23/2017 that if GST on services has been indicated separately in the invoice, then no tax would be deducted on the GST component. However, whether this benefit will be extended to GST on services is need to clarify by the CBDT. Hence will update this point as soon as CBDT issue any notification or circular
194Q TDS V/S 206C(1H) TCS
now some example for easy understanding TDS Section 194Q and TCS section206C(1H)
