Applicable to buyers if:
Buyers whose turnover, gross receipt or sales in the immediately preceding Financial Year was more than Rs.10 crores and
Buyer is responsible for making payment of a sum to the resident seller and
Such payment is to be done for the purchase of goods of the value/ aggregate of the value exceeding INR 50 Lakhs
Example: Financial year ended on 31st March 2021, the buyers whose turnover was more than Rs.10 crore in that year, they have to deduct TDS from their resident seller on the purchase of above Rs.50 lakh in the current financial year 2021-22.
Rate of TDS:
TDS at the rate of 0.1% is to be deducted on the amount exceeding Rs. 50 lakhs in any one financial year from one seller from whom the buyer as mentioned has purchased goods worth more than Rs. 50 lakhs.
How to Calculate TDS:
Purchase above Rs 50.00 lakh in a financial year from one seller
TDS after deduction of Rs 50 Lakh.
Threshold limit is Rs 50 Lakh means seller wise deduction for each seller in every financial year.
Example: if a buyer purchases goods from a seller worth Rs 80.00 lakh each 3 times, it means he bought a total of 240.00 lakhs, now he has to deduct Rs 50.00 lakh from it and the TDS has to be deducted only on Rs.190.00 @ 0.1%.
Sec 194Q is applicable from 1st July 2021 so TDS have to deduct only on purchases after 1st July 2021 but the limit of purchase Rs. 50.00 Lakhs have to be taken into account from 01/04/21.
Example: If a buyer has purchased goods worth Rs 80 lakh from his seller, then he has to deduct the first Rs 50.00 Lakh from it as initial deduction as mentioned in the section then deduct TDS on remaining Rs 30 lakh 0.1% Rs 3,000.00 TDS.
Role of GST:
Calculation of Turnover: Excluding GST
Calculation of TDS @ 0.1% : Including GST
At what time TDS is to be deducted:
TDS is to be deducted at the time when such amount is credited to the seller’s account or paid to him, whichever is earlier.
In other words, if you have not paid the advance amount, then you have to deduct this TDS at the time of purchase of goods and if you have made advance payment then you have to deduct this TDS at the time of advance payment.
PAN not furnished: TDS rate 5%:
If the seller does not give his PAN number to the buyer, then this rate of TDS will be 5% instead of 0.1% .
It is important to note that without PAN the rate of Tax is 20% in other cases but in case of Section 194Q the rate will be 5%.
When to deposit TDS:
This TDS has to be deposited by the 7th day of the end of the month in which the TDS is deducted. For March month TDS has to be deposited by 30th April.
TDS Return: Form 26Q:
Consequences of not deducting/depositing TDS:
Section 40(ia) shall apply and according to that an amount has been paid to a resident on which TDS is to be deducted but not deducted and
if deducted and the same is not deposited before the expiry of the time provided for furnish of ITR under section 139(1)
then the 30% of the amount on which TDS is to be deducted and deposited will be added to the income of that person.
When Sec 194Q does not apply:
Where TDS is to be deducted on the transaction of this purchase under any other provision under the Income Tax Act.
if any transaction on purchase of goods attracts TDS under section 194Q as well as under section 206(C)(1H), then only Sec 194Q shall apply and if he has deducted TDS the seller is not required to deduct TCS under section 206(C)(1H) on such transaction.