A new Section 194Q- TDS on Purchase of Goods has been introduced in the Finance Act 2021. This section came into effect from 1st July 2021. It is applicable to the Buyer who is responsible for making any sum to the resident seller for the purchase of any goods, where the value or aggregate of such values exceeds INR 50 Lakhs in any previous year.
Applicability of Section 194Q?
This Section is applicable to the Buyer in the following cases:
- A buyer whose total sales, gross receipts, or turnover exceeds INR 10 Crore in the immediately preceding financial year.
- If a buyer is making payment to a resident seller only.
- The payment for the purchase of goods exceeds INR 50 Lakhs either individually or aggregate in the whole financial year.
Threshold Limit for TDS on Purchase of Goods for F.Y 2021-22
TDS liability u/s 194Q will arise on all purchase transactions done on or after 1.7 2021. If any purchase is being made between 1.4.2021 till 30.6.2021 then it will be considered for determining the threshold purchase limit of INR 50,00,000 Lakhs in FY 2021-22.
Rate of TDS u/s 194Q
- TDS is to be deducted by the buyer at the rate of 0.1% on the value exceeding INR 50 Lakhs.
- The rate of TDS will be 5% in case the seller doesn’t furnish the PAN.
Note: For calculating the Turnover value the GST amount should not be added but the TDS should be deducted from the value inclusive of GST.
When to deduct TDS u/s 194Q?
- TDS should be deducted by the buyer at the time of purchase of goods OR
- If there is an advance payment for the purchase of goods then the buyer should deduct TDS immediately.
Example
Suppose Mr. A purchases goods worth INR 30 lakhs on 30.5.2021. He purchases goods worth INR 50 lakhs on 1.7.2021. His turnover in the previous financial year 2020-21 was 12 crores.
TDS applicability will be as follows:
Since the turnover of Mr. A exceeds INR 10 Crores in the previous FY 2020-21 & the value of goods purchased by him in the current FY 2021-22, exceeds INR 50 Lakhs (30 Lakhs plus 50 Lakhs = 80 Lakhs), So, Mr. A is liable to deduct TDS at 0.1% u/s 194Q of INR 3000 on purchases of INR 30 Lakhs. (80 Lakhs – exemption limit of INR 50 Lakhs).
Exceptions u/s 194Q
The provision of this section is not applicable where:
- Tax is deducted under any other provisions of the Income Tax Act.
- Tax is collectible under Section 206C but other than the transaction to which Section 206C(1H) applies.
This means if a transaction on the purchase of goods attracts TDS under Section 194Q as well as TCS under Section 206C(1H) then on that transaction only TDS under this section shall be carried out. This situation may arise only if the turnover of both buyer and seller exceeds INR 10 Crore in the immediately preceding financial year.
TDS Return
The deductor/buyer liable to deduct tax under Section 194Q of the Income-tax Act shall file a Quarterly return in Form 26Q.
TDS Certificate
The deductor shall issue a TDS Certificate to the deductee in Form 16A for the tax which has been deducted. The deductor can download the form from the TRACES.
FAQs
The provisions of section 194Q of the Act shall not apply to a non-resident whose purchase of goods from a seller resident in India is not effectively connected with the permanent establishment of a such non-resident in India.
Yes, Section 194Q applies to the purchase of all goods whether capital or revenue account.
Tax is required to be deducted at the time of payment or credit whichever is earlier. In the case of a purchase return, the tax has already been deducted so it will be adjusted against the next purchase against the same seller.
Hey @Dia_malhotra
As per section 194A, TDS on interest other than interest on securities is required to be deducted by any person other than Individual or HUF at the rate of 10%, when paid to a resident. No surcharge, education cess or SHEC shall be added to the above rate.
Hope this helps!
Hey @HarishMehta
TDS u/s 194J needs to be deducted by deductor other than an individual or a HUF, @ 10% on any amount paid or payable to any which is in excess of INR 30,000 as:
Hope this helps!
Hello @the_AK,
Against gross income, you can claim business expenses that you have incurred for earning that income. So you can claim this service fee as a business expense from the gross income received by you.
Hope this helps!
Hey @Bharti_Vasvani can you please help here?
Hello @Anuj_Agarwal,
TDS will be deducted by the company when the interest is actually paid on the securities, so at that time whoever is the owner of such security shall receive the interest and can claim credit of interest.
Hope this helps!
Hey @Anuj_Agarwal,
You can check out this article for more clarity:
Hope this helps!
I have respectable salary income and 1000 insurance commission…ie old commission…not claiming any expenses…can i show it as other income in itr1 or have to file itr 3
Hi @Shivam_B
If you have income from salary and income from insurance commission (business income), then you will be required to file ITR 3.
Itr 3 is so big…have to pay heavy charges…for filing…will it be defective if i do so ie reporting 1000 as other income in itr1 along with salary income…have closed down the insirance work since yesrs…i even contacted commssiom giving broker and closed my commission account…still they are showing in 26as wheress i am not receiving in real
Hi @Shivam_B
As per the recent utilities, ITD gives you the option to select only the schedules applicable to you while filing ITR.
Thus, you are not required to go through the entire ITR 3 form. You can also prepare and file ITR on Quicko, where you can upload form 16 and add commission income under the head “Business & Profession” and file ITR 3, without any charges as Quicko is a DIY platform helping individuals to file taxes.