A new section 194Q has been introduced in the Finance Act 2021 where a buyer, who is responsible for paying any sum to any resident with respect to the purchase of any goods aggregate value of which if exceeds ₹ 50,00,000/- in the previous year, shall be liable to deduct TDS @ 0.1%/5% as the case may be. Certain relevant queries in connection with the same have been dealt with below: –

Q1. What is the % of TDS that needs to be deducted?

Ans: TDS needs to be deducted @ 0.1% or 5% as per below

In case PAN of Seller is availableIn case PAN of Seller is not available

Q2. What is the threshold amount for the deduction of TDS?

Ans: When a Buyer purchases goods of Rs. 50,00,000/-or more in a Financial Year, the buyer has to deduct TDS on such amount exceeding Rs. 50,00,000/-

Q3. Whether this section is applicable to all buyers?

Ans: NO, this section is applicable to those buyers whose annual Turn over in the Previous Financial Year exceeds Rs. 10 Crore

Q4. What is the time of deduction of TDS under such section?

Ans: The TDS shall be deducted at the time of credit of such sum (as mentioned above) to the account of the seller or at the time of payment thereof by any mode, whichever is earlier

Q5. Whether TDS is not deductible in case TCS is collected by the Seller?

Ans: The applicability of TDS under Section 194Q prevails over the applicability of TCS under Section 206(1H), therefore in case the buyer is required to deduct TDS, simultaneously the Seller is not required to collect TCS on the same amount.

Q6. What is the due date for the deposit of TDS deducted under this section to the Government of India?

Ans: TDS deducted shall be deposited within 7th of the next month from the month in which TDS is deducted.

Q7. What shall be the effective date for the applicability of Section 194Q?

Ans: The provisions of Section 194Q shall be applicable with effect from 1st July 2021

Q8. What are the consequences of non-compliance of this provision?

Ans: The non-compliance of provisions of such section shall attract a disallowance of 30% of the amount of expenditure on which TDS is not deducted and deposited

Example of applicability of Section 194Q vis-à-vis Section 206(1H)

Situation 1Situation 2Situation 3
Seller TO < 10CRSeller TO > 10CRSeller TO > 10CR
Buyer TO > 10CRBuyer TO < 10CRBuyer TO >10CR
Sec 194Q is applicableSec 206(1H) is applicableSec 194Q is applicable
Buyer shall deduct TDSSeller shall collect TCSBuyer shall deduct TDS