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Aakash kothari


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TDS was solely deducted on the notified type of payments till now. Businesses must deduct TDS on the purchase of goods from July 1, 2021, in addition to the current scope of TDS deduction depending on notified nature of payment or expenditure. The buyer is now required to deduct TDS on goods purchases and submit it to the government, thanks to the addition of a new section 194Q. Let’s take a closer look at the new section ‘194Q.’

TDS on purchase of goods under section 194Q

TDS on purchase of goods under section 194Q

Who is responsible for deducting TDS under section 194Q?

If your business’s yearly turnover surpasses Rs 10 crore in the previous financial year, you must deduct TDS under clause 194Q.

What are the sorts of purchases for which TDS u/s 194Q must be deducted?

If you buy products costing more than Rs 50 lakhs from a single seller in the same financial year, you must deduct TDS. Other requirements include that purchases be made from a resident and that no TDS has been deducted under any other provisions of the Income Tax Act.

When does TDS have to be deducted, and when does it have to be deducted?

TDS must be deducted at the time of crediting the amount to the seller’s account or at the time of payment, whichever comes first. In other words, you must subtract TDS and pay the remaining sum to the seller whether you are paying the party or booking the purchase invoice, whichever comes first.

What is the TDS rate?

If the seller has a PAN, deduct TDS at 0.1%; if the seller does not have a PAN, deduct TDS at 5%.

Is TCS applicable if the buyer of the goods deducts TDS?

No, Section 194Q makes it clear that if a buyer is required to deduct TDS on a purchase transaction, the seller is not allowed to collect TCS on the same transaction.

TDS deduction scenarios under Section 194Q:

Details in a financial year Use Case
1 2 3 4 (Without Pan)
Turnover of Buyer 11 Cr 24 Cr 6 Cr 17 Cr
Sale Value or consideration 62 Lakhs 7 Lakhs 19 Lakhs 65 Lakhs
TDS deduction by buyer Yes No No Yes
Taxable value 12 Lakhs 15 Lakhs
Rate of TDS 0.01% 5%
The taxable value is the amount over 50 lakhs or the balance of the purchase after 50 lakhs. When a buyer is not eligible to deduct TDS, the seller might collect tax if the buyer meets certain criteria.

In Plus Accounting Software, follow these steps to manage TDS on purchases under Section 194Q.

Follow the steps below to easily record TDS on purchases u/s 194Q in Plus Accounting Software. Please read Record TDS on Purchase of Goods for step-by-step instructions on configuring and recording translations (Under Section 194Q): Record TDS on Purchase of Goods (Under Section 194Q)

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