📍In this session we are going to discuss the newly inserted section 194Q in Income Tax Act,1961.
📍Clause 48 of Finance Bill 2021- Insertion of new section 194Q-
194Q. (1) Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding 50 lakh rupees in any previous year, shall, 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, deduct an amount equal to 0.1 per cent (5% if PAN is not provided) of such sum exceeding fifty lakh rupees as income-tax.
📍 Memorandum Explaining Sec 194Q
Chapter XVIIB of the Act relates to deduction of tax at source. The provisions of this chapter provide for TDS on various payments at rates contained therein. It is proposed to provide for TDS by person responsible for paying any sum to any resident for purchase of goods. The rate of TDS is kept very low at 0.1%. To ensure that compliance burden is only on those who can comply with it, it is proposed that the tax is only required to be deducted by those person (i.e. ―buyer) 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. Central Government is proposed to be empowered by notification in the Official Gazette to exempt a person from obligation under this section on fulfilment of conditions as may be specified in that notification. Tax is required to be deducted by such person, if the purchase of goods by him from the seller is of the value or aggregate of such value exceeding fifty lakh rupees in the previous year. It is also proposed to provide that the provisions of this section shall not apply to, -
(I) a transaction on which tax is deductible under any provision of the Act; and
(ii) a transaction, on which tax is collectible under the provisions of section 206C other than transaction to which sub-section (1H) of section 206C applies. This means, if on a transaction a TDS or tax collection at source (TCS) is required to be carried out under any other provision, then it would not be subjected to TDS under this section. There is one exception to this general rule. If on a transaction TCS is required under sub-section (1H) of section 206C as well as TDS under this section, then on that transaction only TDS under this section shall be carried out. Board with the approval of the Central Government has been empowered to issue guidelines for removing difficulty in giving effect to the provisions of this section.
📍 Practical FAQ
🤔 Date from which this section applicable?
Sec 194Q is applicable from 1. July 2021.
🤔 What if, seller is liable to collect TCS under sec 206C(1H) and buyer is liable to deduct TDS under sec 194Q?
Sec 194Q shall override sec 206C(1H) and hence in such a case only buyer is need to deduct TDS and seller need not to required deduct TDS under sec 206C(1H).
🤔 What is point of taxation arises under sec 194Q?
When buyer credit the sum to the account of seller or payment, whichever is earlier.
🤔 Purchasing Limit for 50Lakhs to be check from 1April,2021 or 1 July,2021?
For purchasing limit of Rs. 50 Lakhs Sec 194Q clearly mentioned PREVIOUS YEAR, hence purchasing limit of Rs. 50Lakhs to be consider from 1 April,2021 and not from 1 July,2021.
🤔 If Purchase amount exceed 50 Lakhs, then TDS to be calculate on complete amount or amount exceeding 50 Lakhs.
For Example, Mr. Buyer buy goods from Mr. Seller amounting Rs. 85 Lakhs and he is liable to deduct TDS under sec 194Q. Now in this case TDS to be deduct on Rs. 35 Lakhs (85-50 Lakhs) @ 0.1%
🤔 Buyer turnover Limit of Rs. 10 Crore to be check for which FY?
Buyer turnover Limit of Rs. 10 Crore to be check for the FY 2020-21
🤔 TDS to be deducted on Total Invoice Value or Taxable Value (before GST)?
CBDT has clarified through Circular No. 23/2017 that if GST on services has been indicated separately in the invoice, then no tax would be deducted on GST component. However, whether this benefit will be extended to GST on services is need to clarify by the CBDT. Hence will update this point as soon as CBDT issue any notification or circular.
🤔 Due date of payment of TDS-
7th of following month
🤔 TDS Return-
Form 26Q to be revise to incorporate this section and return to be file quarterly.
🔗Download Notes - bit.ly/3pTs5dd
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Team Fintaxpro
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📞 +91 97180 97735 (CA Rajat Garg, Partner Fintaxpro Advisory LLP)
⏰Time Stamp
0:00 Intro to Topic
1:08 Sec 206C(1H) TCS on sales of Goods
1:38 Sec 194Q TDS on Purchase of Goods
5:43 Memorandum Explaining Sec 194Q
8:26 Sec 194Q shall override Sec 206C(1H)
9:42 Practical Aspect of Sec 194Q
23:03 Outro