New Section 194Q – TDS on Purchase of Goods

In the Budget for FY 2021-22, a new section 194Q has been introduced which is related to payment of certain sum for purchase of goods.

As per this section, any person, being a buyer who is responsible for paying any sum to any resident for purchase of any goods of the value or aggregate of such value exceeding INR 50 lakhs in any previous year, shall, deduct TDS @0.1% on the total value of the transaction.

Here “buyer” means a person whose turnover in the preceding financial year exceeds INR 10 crore (exclusive of GST).

Applicability:

– This section (194Q) is applicable from 1st July 2021.

A Buyer need to deduct TDS under this section whose turnover during 2020-21 exceed 10 Crore.

– Purchase of goods during the year 2021-22 exceeds 50 Lakhs.

Rate of TDS:

– Rate of TDS will be 0.1%

– If PAN is not furnished then applicable TDS rate shall be 5%.

Point of taxation:

– TDS shall be deducted at the time of credit in the books of accounts or at the time of making payment, whichever is earlier.

Non-compliance of section 194Q:  If the Buyer fails to deduct TDS, 30% of the expenditure will be disallowed.

Others:

– TDS to be paid by 7th of the subsequent month for April to February and 30th April for March.

– TDS return will be furnished under 26Q

– Form 16A to be issued to the vendor 

Exemption:

– This section is not applicable to a person whose TDS deductible under any other provision of the Act

– This section is not applicable to a person whose TCS deductible under any other provision of the Act, other than Sec 206C(1H)