Detailed analysis of Section 194Q

Detailed analysis of Section 194Q

The Income Tax Department has inserted a new section i.e. Section 194Q. As per the provisions of Section 194Q, TDS will be deducted by the buyer if purchase of goods exceeds Rs. 50 lakhs.

Section 194Q is effective from 1st July, 2021.

There is one more section in the Income Tax law similar to this one i.e. Section 2061 (H). As per section 206 (1H), the seller is required to collect TCS from the amount received as consideration for the sale of goods if it exceeds Rs. 50 lakhs in any previous year.

Detailed analysis of Section 194Q with comparison of Section 206 (1H)


Basis of Comparison

194Q

206C (1H)
   
Date of coming into effect   
   
1st July, 2021   
   
1st October, 2020   
   
Casting liability on   
   
Buyer (Payer of money)   
   
Seller (Collector of   money)   
   
1st condition for applicability   
   
Turnover in preceding FY was more than 10   Crores   
   
2ndcondition for applicability (to be checked Party-wise)(only   when 1stcondition   apply)   
   
Purchased goods worth more   than 50 Lakhs in a FY (not applicable for any service)   
   
Sold goods worth more   than 50Lakhsin a FY (not applicable for any service)   
   
Over-riding effect   
   
The section is not applicable when TDS/TCS   is applicable under any section except TCS u/S 206C   (1H) i.e. the section is the weakest amongst all section   but stronger than 206C (1H)   
   
The section is not applicable when TDS/TCS   is applicable under any section i.e.   the weakest section of all   

Exemption
   
When seller is :-
   
1. Non-   resident i.e the buyer has imported goods
   
2. A   person notified   
   
When buyer is :-
   
1. An   importer
   
2. A   Central/ State Govt, Local Authority,Embassy, etc
   
3. A   person notified   
   
Rate of Tax and value on which   to be calculated   
   
0.1% of sum (over and above 50 lakhs with a party in FY)   
   
On excluding GST amount   
   
On including GST amount   

Rate of Tax (PAN not available)
   
5% of sum (over 50 lakhs)   
   
1% of sum (over 50 lakhs)   

Non-Applicability of Section 194Q

  • Where TDS under any other section or TCS u/s 206C(except TCS under 206C(1H)) needs to be deducted, then TDS u/s 194Q will not be deducted.
  • Where Goods have been Purchased from a person not residing in India.

Conclusion

TDS u/s 194Q overrides TCS u/s 206C (1H), i.e. in case where both TDS under 194Q and TCS under section 206 (1H) is applicable, then only TDS on Purchase of Goods u/s 194Q shall be deductible.

If Buyer fails to deduct TDS u/s 194Q, then 30% of such sum will be disallowable u/s 40 (a) (I).

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