Section 194Q of Income Tax -TDS on payments for Purchase of Goods

Section 194Q - TDS on payments made for purchase of Goods

New Section 194Q has been inserted w.e.f. 1-7-2021 which prescribes TDS to be deducted while making payments for the purchase of goods.

Here, we look at different provisions about the same.

Who is required to deduct TDS while making payment for the purchase of goods?

Buyer is required to deduct tax at source in respect of payments made for the purchase of goods from any resident seller.

Buyer has been defined to mean any person whose turnover, sales, or gross receipts during the previous financial year exceeds Rs.10 Crore.

On what amount the TDS is required to be deducted?

TDS in respect of payments made for the purchase of goods exceeding Rs.50 lakhs during the year is required to be deducted. Thus, there is no need for TDS till the purchase from the seller is Rs.50 lakhs. As soon as the purchases exceed Rs.50 lakhs during the year, TDS is required to be deducted on sums that are more than 50 lakhs only.

What is the rate of TDS?

TDS is to be deducted at the rate of 0.10% of the payments made in respect of purchases in excess of Rs.50 lakhs during the year.

TDS is to be deducted at the time of credit of such amount to the account of the seller or at the time of payment whichever is earlier.