TDS On Purchase of Goods: Analysis of Section - 194Q of Income Tax Act, 1961 R V K S and Associates Chartered Accountants

TDS on Purchase of Goods
Analysis of Section – 194Q of

Income Tax Act, 1961
R V K S and Associates
Chartered Accountants
Offices
Chennai | Bangalore | Hyderabad | Mumbai | Vijayawada
Sep 13, 2024 https://www.rvkassociates.com 1
Applicability
S.no Particulars Details
:
1 Objective It mandates the buyer to deduct the TDS for paying
any sum for purchase of any* goods
2 Person liable to deduct Person (whose turnover exceeds ₹ 10 crores during
TDS the Previous
` financial year) paying any sum or
(“The Buyer”) income or amount paid or payable to the Seller
3 Amount on which TDS to Any sum or income or amount paid or payable to
be deducted the Seller exceeding the prescribed limit
4 Prescribed Limit ₹ 50 Lakhs for each seller per year
5 Rate of Deduction 0.1% of sum exceeding ₹ 50 Lakhs
6 Effective date of Inserted in finance Bill, 2021 and the same is
implementation applicable from 1st July, 2021.
*Any goods includes – Capital or Revenue
goods
September 13, 2024 https://www.rvkassociates.com 2

Buyer
Gross Total
Receipt Sales Turnove
s (or) (or) r
Buyer
means a Whose Exceeds
Person ₹ 10
Crores
**Gross Receipts, Sales or Turnover (Excluding
GST) of Previous year of the buyer shall be
considered
Rate of Deduction of TDS Time of Deduction of TDS
At the time of
• 0.1% of purchase credit of such
PAN value exceeding ₹ 50 At the time of
sum to the
lakhs of each seller payment
account of the
seller
• 5% of purchase value
No exceeding ₹ 50 lakhs
PAN of each seller
Whichever is
earlier

Non-
Applicability
Transactions on which TDS
already deducted under any
other provisions of the
Income Tax Act
Sec.194Q is not Seller is a Non-

applicable when Resident
Transactions on which TCS is

collectible u/s 206C,other
than a Transaction on which
TCS is collectible u/s
206C(1H)*
* The TDS u/s. 194Q is applicable to transactions covered u/s. 206C(1H) [TCS on Sale
of goods] subject to limitation of Turnovers specified under the respective sections.

Non-compliances -
consequences
If the buyer fails to deduct the TDS, there would be a disallowance
u/s 40a(ia) of the expenditure up to 30% of value of transaction
Further, there would be Interest on Late deduction @ 1% per

month from date on which Tax is deductible to date of Deduction
u/s 201(1A)
If the buyer fails to deposit the TDS with the Govt. within the due
date then Interest on late payment @ 1.5% per month from date on
which tax is deducted to date of actual payment u/s 201(1A)

Comparison of Sec.194Q and
S.no Particulars
Sec.206C(1H)
Sec.194Q Sec.206C(1H)
:
1 Objective Tax to be deducted Tax to be collected
2 Applicable from 01st July, 2021 01st October, 2020
3 Applicable to Buyer/purchaser Seller
4 Rate of TDS/TCS
- PAN available 0.1% 0.1% ( for FY_20-21-
- No PAN 5% 0.075%)
1%
5 Time of Payment date or At the time of receipt
Deduction/ Credit date, whichever
collection is earlier
6 TDS/ TCS on TDS shall be deducted TCS shall be collected on
Advances
September 13, 2024 on advance payments advance receipts
https://www.rvkassociates.com 7
Comparison of Sec.194Q and Sec.206C(1H) –
Contd.
S.n Particular Sec.194Q Sec.206C(1H)
o: s
7 Prescribed 1. Turnover/Gross 1. Turnover/Gross
limits receipts/Sales of buyer > receipts/Sales of seller >
₹10 crores (Excluding GST) ₹10 crores (Excluding GST)
during the Previous year during previous year
2. Purchase value > ₹50 Lakhs 2. Sale consideration received
from single seller during the > ₹50 Lakhs during the FY
FY
8 Overriding Although both section applies, TCS u/s Sec.206C(1H) collected
Section but TDS u/s 194Q to be only, when Sec.194Q not
deducted applicable
9 Date of 7th day of subsequent month 7th day of subsequent month
Deposit (except march)
10 Due Date 31st of next month of the quarter 15th of next month of the
of filing ending month (except Q4) and quarter ending month (except
September 13, 2024 Q4 it is 31st May
https://www.rvkassociates.comQ4) and 8
Points to Remember
• TDS is also deductible u/s 194Q even, when the amount is credited to any account
with name “Suspense Account” or by another name in the books of accounts.
• If a transaction attracts both TDS u/s 194Q and TCS u/s 206C(1H) then TDS to be
deducted u/s 194Q. This has been emphasized in Second proviso to section
206C(1H) of the Act that the provisions of this section will not apply, if the buyer is
liable to deduct TDS under any other provisions of the Act.
• The Purchase value shall be calculated only after considering purchase returns
value.
• In case of buyer, A declaration to be given to seller stating that Sec.194Q

provisions applicable to him and no need to collect TCS u/s 206C(1H)
• Buyer need to obtain the information as required u/s 206AB to deduct the TDS at
higher rate or at the normal rates.

Importance of Accounting the Purchases in
the Same month
• It is very important for the buyer to Account the purchases in the same month of receipt
of goods.
• For e.g. if goods dispatched on 25 th January, 2021 and received on 10 th February, 2021 –
then the buyer has to account the same in the month of February and will deduct TDS in
February and will deposit the same before 7 th March, 2021.
• Buyer shall have an evidence showing that he received goods late as it may affect the
TDS compliances in the case of Delays.
• Buyer has to ensure that GST credit claimed and TDS deducted month must be same
and Buyer has to deduct the TDS on gross value of purchase (excluding GST)

Illustrations
S.no Buyers Sellers Transacti Applicab PAN Rate of Amount of
: Turnov Turnov on Value le Availabl TDS/TC TDS/TCS
er of er of (₹) Secion e S
Previou Previou
s Year s Year
(₹) (₹)
1 11 5 Crores 65 Lakhs 194Q Yes 0.1% =(65-
Crores 50)*0.1%
=1,500
2 15 9 Crores 45 Lakhs Not Yes - -
Crores Applicabl
e
3 6 Crores 15 59 Lakhs 206C(1H) Yes 0.1% =(59-
Crores 50)*0.1%
=900
4 19 16 74 Lakhs 194Q Yes 0.1% =(74-
Crores Crores 50)*0.1%
=2,400
5 14 25 55 Lakhs 194Q No 5% =(55-
S.n Location Contact (Email ID) Contact
For any o: Numbers
1 Chennai assurance@rvkassociates. +91 44 2815
queries com 0540
contact 2 Bangalore [email protected]

m
+91 80 2341
8753
us 3 Hyderabad hyderabad@rvkassociates. +91
com 9177842406
4 Mumbai [email protected] +91 965348
om 4251
5 Vijayawad [email protected] +91 99660
a 14050

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TDS on Purchase of Goods

Analysis of Section – 194Q of

September 13, 2024 https://www.rvkassociates.com 2

September 13, 2024 https://www.rvkassociates.com 4

Sec.194Q is not Seller is a Non-

Transactions on which TCS is

September 13, 2024 https://www.rvkassociates.com 5

Further, there would be Interest on Late deduction @ 1% per

September 13, 2024 https://www.rvkassociates.com 6

• In case of buyer, A declaration to be given to seller stating that Sec.194Q

September 13, 2024 https://www.rvkassociates.com 9

September 13, 2024 https://www.rvkassociates.com 10

contact 2 Bangalore [email protected]

September 13, 2024 https://www.rvkassociates.com 12

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