Tax Deducted at Source (TDS) is a mechanism used by the government to collect tax from the income earned by individuals and businesses. TDS is applicable on various types of income, including salaries, interest, rent, and payments made to contractors and professionals. Section 194Q is a new provision introduced under the Income Tax Act, 1961, which aims to expand the scope of TDS on purchases of goods.
What is Section 194Q of the Income Tax Act?
Section 194Q was introduced in the Union Budget 2021 and came into effect from 1st July 2021. It is applicable to buyers who are not subject to audit under section 44AB of the Income Tax Act and have made a payment of Rs. 50 lakhs or more in a financial year to a seller for the purchase of goods.
Under this section, the buyer is required to deduct TDS at the rate of 0.1% on the purchase value exceeding Rs. 50 lakhs. The TDS deducted needs to be deposited with the government and the seller can claim credit for the TDS deducted while filing their tax return.
Who is covered under Section 194Q?
Section 194Q applies to all buyers who are not required to get their accounts audited under section 44AB of the Income Tax Act. It includes individuals, Hindu Undivided Families (HUFs), partnership firms, LLPs, companies, and any other person who purchases goods from a seller.
The provision also covers buyers who are not engaged in any business or profession, but have made a payment of Rs. 50 lakhs or more to a seller for the purchase of goods.
What are the key features of Section 194Q?
- Applicability: Section 194Q is applicable to all buyers who are not subject to audit under section 44AB of the Income Tax Act and have made a payment of Rs. 50 lakhs or more in a financial year to a seller for the purchase of goods.
- TDS rate: The TDS rate under this section is 0.1% on the purchase value exceeding Rs. 50 lakhs.
- Threshold limit: The threshold limit for TDS under Section 194Q is Rs. 50 lakhs in a financial year.
- Scope: The provision applies to all types of purchases of goods, including capital goods and raw materials.
- Compliance: Buyers are required to deduct TDS and deposit it with the government within the due dates specified under the Income Tax Act. Failure to do so can attract penalties and interest.
- Credit for TDS: Sellers can claim credit for the TDS deducted while filing their tax return.
Conclusion
Section 194Q of the Income Tax Act is a new provision introduced to expand the scope of TDS on purchases of goods. It is applicable to buyers who are not subject to audit under section 44AB of the Income Tax Act and have made a payment of Rs. 50 lakhs or more in a financial year to a seller for the purchase of goods. Buyers need to deduct TDS at the rate of 0.1% on the purchase value exceeding Rs. 50 lakhs and deposit it with the government within the due dates specified under the Income Tax Act. Sellers can claim credit for the TDS deducted while filing their tax return. It is important for buyers to comply with the provisions of Section 194Q to avoid penalties and interest.
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Frequently Asked Questions (FAQs)
Q: What is Section 194Q of the Income Tax Act?
A: Section 194Q is a new provision introduced under the Income Tax Act, which mandates buyers to deduct TDS at the rate of 0.1% on purchases of goods exceeding Rs. 50 lakhs in a financial year from sellers who are not subject to audit under section 44AB of the Income Tax Act.
Q: Who is required to deduct TDS under Section 194Q?
A: Buyers who are not subject to audit under section 44AB of the Income Tax Act and have made a payment of Rs. 50 lakhs or more in a financial year to a seller for the purchase of goods are required to deduct TDS under Section 194Q.
Q: What is the TDS rate under Section 194Q?
A: The TDS rate under Section 194Q is 0.1% on the purchase value exceeding Rs. 50 lakhs.
Q: What is the threshold limit for TDS under Section 194Q?
A: The threshold limit for TDS under Section 194Q is Rs. 50 lakhs in a financial year.
Q: What is the due date for depositing TDS under Section 194Q?
A: The due date for depositing TDS under Section 194Q is the 7th of the following month in which the TDS was deducted.
Q: Is TDS applicable on all types of purchases of goods?
A: Yes, TDS is applicable on all types of purchases of goods, including capital goods and raw materials.
Q: Can a seller claim credit for the TDS deducted under Section 194Q?
A: Yes, a seller can claim credit for the TDS deducted under Section 194Q while filing their tax return.
Q: What happens if a buyer fails to deduct TDS under Section 194Q?
A: If a buyer fails to deduct TDS under Section 194Q, they may be liable to pay interest and penalties under the Income Tax Act.
Q: Does Section 194Q apply to import of goods?
A: No, Section 194Q does not apply to import of goods as TDS on import of goods is covered under a separate provision of the Income Tax Act.
Q: Is Section 194Q applicable to buyers who are engaged in business or profession?
A: Yes, Section 194Q is applicable to all buyers who are not subject to audit under section 44AB of the Income Tax Act, including those who are engaged in business or profession.
