Section 194Q of Income Tax Act
Section 194Q of the Income Tax Act, introduced in the Union Budget 2021 and effective from 1st July 2021, is a provision that specifically applies to buyers making payments to resident sellers for the purchase of goods.
To visit:https://www.incometax.gov.in
According to this provision, if a buyer makes payments exceeding Rs. 50 lakh to a resident seller for the purchase of goods within a financial year, the buyer is require to deduct tax at source (TDS) at a rate of 0.1% on the amount exceeding Rs. 50 lakh.
However, if the seller has already deducted TDS under any other provision of the act, the buyer is not obligate to deduct TDS under section 194Q.
The primary objectives of this provision are to broaden the tax base and ensure that sellers fulfill their tax obligations on the sale of goods. Additionally. It aims to simplify tax compliance for small taxpayers by exempting them from the TDS provisions.
FAQs:
1. What is Section 194Q of the Income Tax Act?
Ans: Section 194Q mandates that a buyer must deduct TDS at 0.1% on purchases of goods exceeding ₹50 lakhs in a financial year.
2. When did Section 194Q become applicable?
Ans: Section 194Q came into effect from July 1, 2021.
3. Who is liable to deduct TDS under Section 194Q?
Ans: The buyer is responsible for deducting TDS if their turnover exceeds ₹10 crore in the preceding financial year.
4. What is the TDS rate under Section 194Q?
Ans: The TDS rate is 0.1% on the purchase value exceeding ₹50 lakhs.
5. Is TDS applicable on the GST component under Section 194Q?
Ans: No, TDS under Section 194Q is deducted on the purchase value excluding GST.
6. What is the threshold limit for deducting TDS under Section 194Q?
Ans: TDS is required only if the aggregate purchases from a seller exceed ₹50 lakhs in a financial year.
7. What happens if both Section 194Q and Section 206C(1H) are applicable?
Ans: If both sections apply, TDS under Section 194Q will prevail, and TCS under Section 206C(1H) will not apply.
8. Is Section 194Q applicable to non-resident buyers?
Ans: No, Section 194Q is not applicable to non-resident buyers who do not have a business presence in India.
9. What happens if the buyer fails to deduct TDS under Section 194Q?
Ans: If TDS is not deducted, the buyer may face disallowance of 30% of the expenditure under Section 40(a)(ia).
10. Are services covered under Section 194Q?
Ans: No, Section 194Q applies only to the purchase of goods, not services.
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