- May 19, 2023
- 2 min read

Section 194Q: TDS on Purchase of Goods

Introduction:

Are you purchasing goods from your vendors having a value of more than Rs. 50 Lakhs during the current year?

Then be careful while making payments to them. Be aware of the new TDS compliance while making payments to your vendors.

Government in the latest Budget 2021-22 introduced a new TDS Section 194 Q on the purchase of goods exceeding value Rs. 50 Lakh, which is applicable from 1st July 2021.

This is the first time in the history of Income tax to levy TDS on Goods, till now we have TDS on various services.

Let us understand in detail.

Is your entity's turnover exceeding Rs. 10 Cr in preceding FY

Provision:

Any person, being a buyer who is responsible for paying any sum to any resident for the purchase of any goods of the value or aggregate of such value exceeding 50 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% of such sum exceeding 50 lakh rupees as income-tax.

Reason for inserting this provision: –

The main reason for inserting the new TDS Sec.194Q by the Income tax department is to cover up the loophole in the newly inserted TCS provision i.e. Sec 206C (1H) which came into force on 1st October 2020.

Sec. 206C (1H) :

Every person, being a seller having aggregate Turnover more than 10 Crores during P.Y, receives any amount as consideration for the sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section (1) or subsection (1F) or sub-section (1G) shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1% of the sale consideration exceeding fifty lakh rupees as income-tax. This section becomes operative from 1st October 2020.

Conclusion:

There were instances where Seller Turnover with less than 10 Crore but his receipt from sales of goods to a particular buyer exceeded Rs.50 Lakh. Therefore, there was no liability of TCS on the seller. To handle this situation Government has come up with a similar type of provision for the Purchaser by making an obligation to deduct TDS applicability @ 0.1%.