New IT Section 194Q has been inserted by the Finance Act, 2021, which stipulates new provisions relating to TDS @ 0.1% on transaction of purchase of goods aggregating more than Rs. 50 lacs in a year, applicable in the case of persons having turnover above Rs. 10 crores, w.e.f. 01/07/2021.
No TDS u/s 194Q s applicable for transactions, which are subject to any other TDS/ TCS provisions under the Income Tax Act, 1961, except relating to TCS on sale of goods.
Section 194Q has been introduced to widen the scope of TDS. However, to keep the compliance burden under control, the same has been made applicable only for persons whose turnover is above Rs. 10 crores.
Section 194Q(1) seeks to provide that any person/ buyer, having turnover above Rs. 10 crores in preceding financial year, who is responsible for paying any sum to any resident seller for purchase of any goods of the value exceeding Rs. 50 lacs in any previous year, shall, at the time of credit/ payment of such sum, whichever is earlier, deduct tax at source @ 0.1% of such sum exceeding Rs. 50 lacs.
Section 194Q: Deduction of tax at source on payment of certain sum for purchase of goods
New Section 194Q has been inserted in the Income Tax Act, 1961 vide Section 54 of the Finance Act, 2021, as under:
“(1) 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 fifty 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 per cent of such sum exceeding fifty lakh rupees as income-tax.
Explanation.- For the purposes of this sub-section, “buyer” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out, not being 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.
(2) Where any sum referred to in sub-section (1) is 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, such credit of income shall be deemed to be the credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
(3) 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.
(4) Every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and the person liable to deduct tax.
(5) 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.”
CBDT Guidelines/ Clarifications on issues relating to TDS/ TCS u/s 194-O(4), 194Q(3) and 206C(1-I)
In this regard, CBDT has issued Guidelines/ Clarifications on issues relating to TDS/ TCS u/s 194-O(4), 194Q(3) and 206C(1-I) for removal of difficulties in the matter of applicability of TDS in the case of purchase of goods/ e-commerce operators and applicability of TCS on certain payments, vide Circular 20/2021.