As we all know, Till now, there are several TDS provisions to cover services related transactions such as professional services, rent, interest, work contract, etc. Now, The Indian Government has introduced a new section 194Q in the Income Tax Act, 1961 vide the Finance Act, 2021. As per Section 194Q w.e.f. July, 1st 2021 where the purchase of goods also under the ambit of TDS applicability.
Therefore, let us understand this new provision (Section 194Q) of TDS on the Purchase of Goods in detail.
Who is liable to deduct TDS under Section 194Q
Buyer of the goods shall deduct the TDS if the value of the purchase in the preceding financial year exceeds Rs.50,00,000/-
What is the TDS Rate on purchase of goods under Section 194Q
Buyers of Goods shall deduct TDS at 0.1% if the seller has a PAN. Furthermore, as per recent notification, there will be a higher tax deduction if Income Tax Return is not filed for 2 Years. In short-
- If PAN/ Aadhar of the seller is available TDS on Purchase of Goods – 0.1%
- If PAN/ Aadhar of Seller is not available, then the TDS – (Section 206AA) – 5%
- In case if ITR for the last two years not filed by the seller, then the TDS will be(Section 206AB)* – 5% or Double the standard rate
When will TDS on Purchase of Goods get triggered?
It is mandatory to deduct TDS at the time of credit of such sum to the seller’s account or at the time of payment, whichever is earlier. However, The TDS deduction triggers only when-
- The annual turnover of a business exceeds Rs 10 crore in the previous financial year.
- Goods worth more than Rs. 50 lakhs in total are sold during the previous year to one Buyer.
Who is exempted from new section 194Q?
TDS deduction under section 194Q doesn’t apply in the following cases.
- If the turnover of the buyer is lesser than Rs. 10 Crore in the fiscal year.
- If the goods sold to the buyer aren’t worth Rs. 50 Lakh or more in total for the previous year.
- Under all other TDS requirements, the purchaser is accountable for deducting TDS.
- Except for section 206C, the seller is collecting TCS under other provisions.
In Conclusion, The TDS aided the government to curb tax evasion in the service industry. Similarly, with the new provision of TDS on the Purchase of Goods, the government will curb tax evasion in the goods sector too. Hence, it will have a significant impact on taxpayers to compliance with taxation laws.
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