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Glimpse of Section 194Q which is effective from 01st July 2021

Rate of TDS under section 194Q

i.            Buyer of all goods will be liable to deduct tax at source

Ø  @ 0.1% of sale consideration

Ø  exceeding INR 50 Lakhs in a Financial Year

ii.            Tax to be deducted @ 5% 

Ø  if the seller does not provide PAN/Aadhar(as per Memorandum explaining the provisions in the Finance Bill, 2021).

 

Turnover for applicability of section 194Q

TDS obligation will be on buyers, who have gross receipts/turnover exceeding INR 10 Crores in preceding financial year

 

Conditions for applicability of section 194Q

i.                      TDS obligation will arise

Ø  if the payment is made to a resident seller

ii.                    No requirement of TDS u/s 194-Q on a transaction:

Ø  if TDS is deductible under any other provision or

Ø  TCS is collectible under section 206C [excluding 206C(1H)]

iii.                  On a given transaction 

Ø  either TDS u/s 194Q will apply or 

Ø  TCS u/s 206C(1H) will apply

Both TDS u/s 194Q and TCS u/s 206C(1H) will not apply on the same transaction

iv.                   In case of potential overlap between the two provisions  

Ø  TDS u/s 194Q will apply and

Ø  TCS u/s 206C(1H) will not apply

 Date of Applicability-

This provision will be applicable with effect from 1st July 2021.

 Time Limit for deduction of TDS under section 194Q-

Tax to be deducted at the earliest of the following dates:

Ø  time of credit of such sum to the account of the seller or

Ø  time of payment

Comparison of Sec 194Q and 206C(1H) of Income Tax Act, 1961 

Particulars	194Q	206C(1H)
Purpose	Tax to be DEDUCTED	Tax to be COLLECTED
Applicable to	Buyer/Purchaser	Seller
With effect from	01/07/2021	01/10/2020
When Deducted or collected	Payment or credit, whichever is earlier	At the time of receipt
Advances	TDS shall be deducted on advance payments made	TCS shall be collected on advance receipts
Rate of TDS/TCS	0.1%	0.1% (0.075% for FY 2020-21)
PAN not available	5%	1%
Triggering point	Turnover/Gross Receipts/Sales from the business of BUYER should exceed Rs.10cr during previous year (Excluding GST)   Purchase of goods of aggregate value exceeding Rs.50Lakhs in P.Y. (The value of goods includes GST)	Turnover/Gross Receipts/Sales from the business of SELLER should exceed Rs.10cr during previous year (Excluding GST)   Sale consideration received exceeds Rs.50Lakhs in P.Y. (The value of goods includes GST)
Exclusions	Yet to be notified by government	If Buyer is- Importer of goods  Central/State Government, Local Authority An embassy, High Commission, legation, commission, consulate and trade representation of a foreign state.
When to deposit/collect	Tax so deducted shall be deposited with government by 7th day of subsequent month	Tax so collected shall be deposited with government by 7th day of subsequent month
Quarterly statement to be filed	26Q	27EQ
Certificate to be issued to seller/buyer	FORM 16A	FORM 27D