Sec 194Q TDS on purchase of goods
Last edited on 17-June-2021
Conditions
- Buyer has turnover/receipts exceeding Rs.10 crores in the previous financial year
- Aggregate purchases from a person above Rs.50 lakhs in that financial year
- Only goods & not services
- Payment to resident seller
- TDS @ 0.1% on the amount exceeding Rs.50 lakhs
- TDS @ 5% if PAN not furnished – refer Sec 206AA
- TDS @ 5% if 2 years income tax return not filed by deductee – refer Sec 206AB
- Applicable from 01-07-2021 (but for calculating purchases threshold from 01-04-2021)
- For purchase value calculation include GST amount (based on Circular 17 dated 29-09-2020 for 206C(1H)
- Disregard purchase returns for TDS % calculation but can consider for checking threshold limit of Rs.50 lakh
- Applicable to advances for purchase also based on Circular No 17 related to sec 206C (1H)
- If 0.1% TDS not deducted, 30% of purchases shall be disallowed u/s 40(a)(ia)
Not applicable
- If TDS under any other section is applicable
- If TCS u/s 206C [other than sub-section (1H)] is applicable
Further Reading
“TDS on Purchase of Goods” – All Questions Answered! Dated May 10, 2021
https://database.taxsutra.com/articles/9a202f9463df3658d69522b25b972e/expert_article
Extracts of Income Tax provisions for reference:
1 Deduction of tax at source on payment of certain sum for purchase of goods.
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 fifty 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 of such sum exceeding fifty lakh rupees as income-tax.
Explanation.—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.
……….
(5) The provisions of this section 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 sub-section (1H) of section 206C applies.
1 Ins. by the Act No. 13 of 2021, w.e.f. 1-7-2021.
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