Section 194Q – TDS on Payment for Purchase of Goods

Section 194Q – Deduction of tax at source on payment of certain sum for purchase of goods

Introduction of Section 194Q:

Section 194Q of the Income Tax Act, 1961 deals with the deduction of tax while making payments to the seller for goods purchased from him.

Applicability:

TDS u/s 194Q shall be deducted by a buyer if he is paying any sum to a resident seller for the purchase of goods of value exceeding Rs.50,00,000 in any year. This limit of Rs.50,00,000 can be the value for a single purchase or aggregate value for all the purchases made from that seller in a financial year.

A buyer would be required to deduct TDS u/s 194Q if his total sales, gross receipts or turnover from his business exceeds Rs.10 crores during the immediately preceding financial year.

Non applicability:

1. If the seller is non resident.
2. In case of import of goods.
3. Transactions traded through recognised Stock Exchange, transactions cleared and settled by the recognised clearing operations, including recognized stock exchanges or recognized clearing operations located in International Financial Service Center.
4. Transactions in electricity, renewable energy, certificates and energy saving which are traded through recognised power exchange.
5. Section 194Q is applicable irrespective of residential status of buyer.  However, if the purchase of goods is made by the non-resident buyer from the resident seller and such purchase by non-resident is not effectively connected with his permanent establishment, then provisions of S.194Q are not attracted.
6. If seller of the goods is central government or state government no TDS shall be deducted u/s 194Q. However,  TDS provisions are applicable if the seller is any public sector undertaking or corporation established under Central or State Act or any other such body, authority, or entity.

TDS rate:

TDS shall be deducted at 0.1% of the value of the goods at the earlier of the  credit of sum to the seller or payment by cash or cheque or any other mode.
In case where PAN of the seller is not furnished, TDS shall be deducted at the rate of 5% under this section.

Non compliance of Section 194Q:

If any buyer fails to comply with the provisions of Section 194Q, he would be subject to the disallowance of 30% of the transaction value.