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TDS on the Purchase of Goods under section 194Q

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TDS under section 194Q on Purchase of Goods Exceeding Rs 50 Lakh-TaxIndiaClub

Here, we discuss the Provision of TDS on the Purchase of Goods under section 194Q. Time of tax deduction on the purchase of goods under Section 194Q, Rate of TDS deduction under Section 194Q, The exemption is available under section 194Q and Examples relating to section 194Q.

From 1 July 2021 Section 194Q is applicable on Purchase of Goods as per The Finance Act, 2021. To Get all Details about Section 194Q – “TDS on the Purchase of Goods” read this full article.

Provision of TDS on the Purchase of Goods under section 194Q

As per the Provision of Section 194Q of the Income Tax Act, TDS is deductible if when payment is made for the purchase of goods subject to the Following Condition;

  • Any person, being a buyer who is responsible for paying any sum to any resident seller for the purchase of any goods.
  • The value or aggregate of the value of Purchase of Goods exceeding INR 50 lakh rupees in any previous year.

Explanation of Section 194Q: For the purposes of this sub-section, “buyer” means a person whose total sales, gross receipts, or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out, not being a person, as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.

Time of tax deduction on the purchase of goods under Section 194Q

TDS on Purchase of Goods under section 194Q is deducted by the Buyer if all condition specifies in this section is fulfilled.

  • 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.

Rate of TDS deduction under Section 194Q

The buyer is liable to deduct TDS on the Purchase of Goods under section 194Q at the rate of 0.1% of the purchase value above INR 50 Lakhs.

However, in case the Permanent Account Number (PAN) of the seller is not available. Then, the buyer would be liable to deduct tax @5%.

The exemption is available under section 194Q

The provisions of TDS on the Purchase of Goods under section 194 shall not apply to a transaction on which

  • (a) tax is deductible under any of the provisions of this Act; and
  • (b) tax is collectible under the provisions of section 206C other than a transaction to which subsection (1H) of section 206C applies..

Examples relating to section 194Q

Let’s take one Example relating to section 194Q to understand the provision properly.

Edueasify ltd, a buyer, having a total turnover of INR 60 Crores. Edueasify ltd purchases goods from TaxIndiaClub Ltd, a seller, worth INR 55 Lakhs.

The details Analysis of applicability of section 194Q in the given transaction is narrated hereunder-

  • Since buyer’s turnover is above INR 10 Crores, provisions of section 194Q get applicable.
  • Further, the buyer has purchased goods having a value of more than INR 50 Lakhs.
  • TDS under section 194Q will be deductible by the buyer in the following manner-
ParticularsAmount
Taxable amount (INR 55 Lakhs – INR 50 Lakhs)INR 5 Lakhs
The rate at which TDS deductible under section 194Q0.1%
Amount of TDS deductibleINR 500

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