TDS on Purchase of Goods- Section 194Q summarized
Introduction:
The provisions of Tax Deduction at Source (TDS) have been a major source of direct tax revenue to the Government. This has led the scope of TDS been widened over the period of time. The Finance Act, 2020 introduced section 206C(1H) which provided for collection of tax (TCS) by the seller from the buyer in cases where the amount received as sales consideration against goods exceeded Rs. 50 Lakhs in the previous year. Now, the Government has come out with new TDS provisions on similar lines. The Finance Act, 2021 inserted a new section “Section 194Q” providing deduction of tax at source on purchases of goods. This section will be effective from 1st July, 2021.
Applicability of Section 194Q
- Under section 194Q, the buyer is liable to deduct TDS.
- Provisions of section 194Q are not applicable in case the seller is a non-resident.
- TDS shall be deducted in case of purchase of any goods. Thus, no TDS is required to be deducted on purchase of services.
- The buyer shall be liable to deduct TDS under section 194Q only when his turnover in the immediately preceding financial year was more than Rs. 10 crores. If the turnover of the buyer in the last financial year is below or up to Rs. 10 crores, the buyer is not responsible for TDS deduction u/s 194Q.
- TDS shall be deducted @ 0.1% of the purchase value of goods in excess of Rs. 50 Lakhs from the seller. But if PAN of the seller is not available, TDS shall be deducted @ 5%.
|
PAN Available or Not |
Rate of TDS u/s 194Q |
|
If PAN of seller is available |
0.1% |
|
If PAN of seller is not available |
5% |
- TDS shall be deducted at the time of credit to the account of seller or at the time of payment, whichever is earlier. Thus, TDS shall be deducted on the advance payments also.
- The Central Government may notify the cases where the “Buyer” shall not be required to deduct TDS under section 194Q.
- Exemptions from TDS u/s section 194Q:
TDS provisions under section 194Q shall not be applicable in the following two cases:
(a) Transactions on which TDS is already deductible under other provisions of the Income Tax Act;
(b) Transactions on which TCS is collectible under section 206C [other than a transaction on which TCS is collectible u/s 206C(1H)].
Due date of deposit of TDS:
TDS deducted under section 194Q in a particular month shall be deposited on or before the following dates:
|
Type of deductor |
Mode of payment of TDS |
Due date for deposit of TDS |
|
Office of Government |
Without Income Tax Challan |
On the same day on which tax is deducted |
|
With Income Tax Challan ITNS 281 |
Within 7 days from the end of the month in which tax is deducted |
|
|
Other Deductors |
With Income Tax Challan ITNS 281 |
|
Due date of filing TDS return
Where TDS has been deducted as per the provisions of section 194Q, the buyer shall furnish TDS return in Form 26Q on a quarterly basis on or before the following dates:
|
Quarter |
Due Date of furnishing TDS Return |
|
April- June |
31st July of the Financial Year |
|
July- September |
31st October of the Financial Year |
|
October- December |
31st January of the Financial Year |
|
January- March |
31st May of the financial year immediately following the financial year in which TDS is deducted |
Penalty for non-filing of TDS return:
|
Late Fees under section 234E |
|
|
Penalty under section 271H |
If the buyer fails to furnish TDS return or furnishes inaccurate information in the TDS return, he may be liable to penalty u/s 271H of a minimum Rs. 10,000 and up to Rs. 1 Lakh. |
