New Section 194Q – TDS on Purchase of Goods (Union Budget 2021)

Applicability: This shall be effective 1st July’21

TDS Rate:

  • 0.1% on amount exceeding Rs 50L
  • 5% if PAN is not furnished

When to Deduct?

  • Assessee deducts while paying for the goods purchased
  • Aggregate value of goods purchased exceeds Rs.50L in the previous year

Deduction by Whom?

  • Tax shall be deducted by the buyer whose total turnover from business exceed Rs 10Cr during the immediate previous year

Consequences of non-deduction by Purchaser:

  • The value of Purchase transactions on which TDS is not deducted will be subject to 30% disallowance

Clarifications:

  • TDS to be deducted on advance payment as well
  • TDS to be deducted on basic amount only, i.e. not on GST value
  • If on a transaction TCS is required under section 206C(1H) as well as TDS under section 194Q, then in respect of that transaction only TDS under section 194Q shall only be carried out

Example: Mr. Todi purchases goods worth Rs 1Cr for his business. Mr. Todi shall track purchases from each supplier and shall deduct TDS @ 0.1% as soon as purchase exceeds Rs 50 lacs. In above case, first Rs. 50L of purchase shall not be subject to TDS and on rest Rs. 50L TDS under section 194Q will be deducted i.e. Rs 5,000. For rest of all the transactions during the year TDS will be deducted for each purchase transaction.

  • This section shall only apply if turnover of Mr. Todi exceeds Rs 10Cr during immediate previous year
  • If the supplier does not furnish his PAN, then TDS rate shall be 5% and not 0.1%
Authored by – CA Anushka Saraogi

TDS/TCS Provisions – Union Budget 2021

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