TDS of 0.1% on transaction of purchase of goods exceeding Rs. 50 lakh in a year has been proposed in Budget 2021, applicable in the case of persons whose turnover exceeds Rs. 10 crore. This new TDS of 0.1% is not applicable for transactions subject to any other TDS/ TCS provisions are applicable [except relating to TCS on sale of goods].
In order to widen the scope of TDS, it is proposed in the Budget 2021 to levy a TDS of 0.1% on a purchase transaction exceeding Rs. 50 lakh in a year. In order to reduce the compliance burden, it is also proposed to provide that the responsibility of deduction shall lie only on the persons whose turnover exceeds Rs. 10 crore.
Accordingly, Clause 48 of the Finance Bill 2021 seeks to insert a new Section 194Q in the Income-tax Act relating to the deduction of tax at source on payment of certain sum for purchase of goods, with effect from 1st July, 2021.
Section 194Q(1) seeks to provide that 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.
The Explanation to the proposed Section 194Q(1) seeks to define “buyer” to mean 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.
Section 194Q(2) seeks to provide that where any sum referred to in subsection (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 a credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
Section 194Q(3) seeks to provide that if any difficulty arises in giving effect to the provisions of the said section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty.
Section 194Q(4) seeks to provide that every guideline issued by the Board under sub-section (3) shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and the person liable to deduct tax.
Section 194Q(5) seeks to provide that the provisions of the proposed 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.