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New TDS provision (section 194Q)


Last year on 2019-20 government has introduced TCS on sale of goods u/s 206C (1H) but then the applicability of this section was restricted to some specified expense and income but now it has covered most of the things and now in the financial year 2020-21 government has introduced one more new TDS provision which is section 194Q. The things are similar in both of the section is the rate of deduction is nothing but just 0.1%, which is not that much bigger. As the government is just aiming to collect TDS on purchase not just to collect the revenue it is to track the details of purchase and all the transaction which is making so that people can’t steal the tax because if once transaction has been recorded than the taxpayers have to mention that into income tax or GST return. Let’s know who are eligible for deduction of TDS 194Q.
A purchaser who is responsible for paying any amount to the any resident seller for purchase of goods exceeding the amount of 50lakh in the previous year, so at the time of crediting the amount on the account seller or at the time of payment making whichever is earlier then the buyer are responsible to deduct TDS equals to 0.1 per cent. Buyer are the person who have the turnover, gross receipt is exceeding the amount of 10 cores.

Applicability of section 194Q

This TDS provision is going to applicable from the date of 01/July/2021, it is applicable on the TDS on purchase of goods.

Conditions are applicable for deductors:-

  1. The purchase should be made by resident person only.
  2. TDS are applicable on advance payment also.
  3. Applicable on only those buyers whose turnover of last year exceeds amount 10crores.
  4. Only applicable if the price of purchased goods or aggregate of value exceeds 50akhs in the previous years.
  5.  The primary liability of this provision is on the buyer’s part, the buyer has to deduct TDS on the aggregate purchased goods.

What is the rate of TDS which is applicable on the purchases?

If the buyer purchases goods from the resident then the TDS should be deduct as 0.1% on payment or if the PAN has not furnished by the seller then rate of TDS will be 5%. As the threshold of the for the section 194Q is 50lakhs if the aggregate sum of goods will not exceed the Rs. 50lakh then there is no need to deduct TDS on purchase.

There are the cases when deduction of TDS under section 194Q is not applicable on the purchases.

  • When the TDS are deductable under any other section then deduction under 194Q is not applicable, suppose if the job work purchases by the buyer then TDS under section 194C will be prevail to apply and 194Q will not be applicable.
  • When TCS charges by seller, suppose if the buyer purchases motor bike then TCS will be charged by the dealer under section 206C(1F), then there is no need to deduct TDS under section 194Q.
  • When seller also liable to charge TCS on sale under section 206c(1H) , suppose if the seller are liable to charge TCS on the sale goods on which the buyer are also liable to deduct TDS under section 194Q then the questions raises whether the TDS should deduct or TCS should charge. Then govt. has said in this situation deduction of TDS u/s 194q will prevail and TCS will not be chargeable

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