What is the new TDS Section 194Q under income tax?
Newly Inserted TDS Section 194Q under Income-tax, Act 1961: Deduction of tax at source on payment of a certain sum for purchase of goods.
Meaning of Buyer as per section 194Q:
“Buyer” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed 10 crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out.
It excludes 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.
Explanation:
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 % of such sum exceeding 50 lakh rupees as income-tax.
Cases of Deemed Payment for the applicability of this provision:
Where any sum credited to any account, whether called “suspense account” or by any other name, in the books of account of the person liable to pay such income (i.e. Buyer), such credit of income shall be deemed to be the credit of such income to the account of the payee (Seller) and the provisions of this section shall apply accordingly.
If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty.
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.’
Note:
- In case, where the provision of both the sections (i.e. Section 194Q and Section 206C(1H) applies to the transaction then, Section 194Q prevails and the Buyer is liable to deduct TDS. Therefore, no point of collecting TCS on the same arise.
- where the tax is required to be deducted under section 194Q and Permanent Account Number (PAN) is not provided, the TDS shall be at the rate of 5%.
- These amendments will take effect from 1st July, 2021.
Read More On Budget 2021
Read Analysis of Section 206C(1H)
