Want Tax Deduction at Source (TDS) on goods purchase

Section 194Q decoded! This post from Udaipur’s leading Chartered Accountants covers everything businesses need to know about TDS on purchases.

Section 194Q – Tax deduction at Source (TDS) on Purchase of Goods

1. Under Section 194Q of the Income Tax Act, 1961 WEF from 1.7.2021 “any person responsible for paying any sum to any resident for the purchase of goods, is liable to make TDS on such payments.”
2. Tax is required to be deducted by a person (i.e. buyer) whose total sales, gross receipts, or turnover from business carried on by him exceeds ten crore rupees during the financial year immediately preceding the financial year in which the purchase is made.
3. Tax is required to be deducted by such person if the value or aggregate value of goods purchased by him from the seller exceeds fifty lakh rupees in the previous year.
4. As per the provision of this section, it will apply to any person who, being a buyer is responsible for making payment to a resident.
5. This section is not application for importation of goods or  on services.

Applicability: Effective from 1st July 2021

TDS Deduction Rate

• 0.1% on amount exceeding Rs 50.00 Lacs subject of providing PAN Card.
• 5% if PAN is not furnished

Time of Deduction of TDS

• Assessee deducts while paying for the goods purchased
• Aggregate value of goods purchased exceeds Rs.50L in the previous year

Apply on Whom

• Tax shall be deducted by the buyer whose total turnover from business exceed Rs 10Cr during the immediate previous year

Consequences of non-deduction:

• The value of Purchase transactions on which TDS is not deducted will be subject to 30% disallowance

When to deposit TDS

• The organization deducting the TDS, known as the deductor, is responsible for paying the appropriate TDS to the government on or before the due date. With a few exceptions, the due date for TDS payments is always the 7th of the following month.

For example, if an organization wishes to pay TDS for the month of July, the TDS payment due date will be August 7th. One significant exception is the month of March, for which TDS payments may be submitted until April 30th.

When to file the TDS Return –

26Q is required to be filed on quarterly basis.

Sr No.	Quarter ended on	Latest by filing date
1	June,	31st July
2	September	31st October
3	December,	31st January
4	March	31st May

Clarifications:

• TDS to be deducted on advance payment as well
• TDS to be deducted on basic amount only, i.e. not on GST value
• If on a transaction TCS is required under section 206C(1H) as well as TDS under section 194Q, then in respect of that transaction only TDS under section 194Q shall only be carried out
• If the supplier does not furnish his PAN, then TDS rate shall be 5% and not 0.1%.
• The applicability of Section 194Q does not extend to government entities and transactions conducted through recognized stock exchanges
• If  the seller replaces the products that have been returned by the customer, it is not possible to thereafter make any adjustments to the Tax Deducted at Source (TDS).

Hence making sense of Section 194Q – TDS on goods purchase. This in-depth guide from trusted Chartered Accountants in Udaipur breaks down the provision for businesses.