What is section 194Q

Any person, being a buyer shall deduct an amount equal to 0.1 per cent. on purchase value exceeding fifty lakhs rupees as income-tax.

Applicability of Section 194Q:

1. There is a purchase of goods from a resident person;
2. Goods are purchased for a value or aggregate of value exceeding Rs. 50 lakhs in any previous year; and
3. The buyer should not be in the list of persons excluded from the provision for deduction of tax.

tIME OF DEDUCTION OF tDS UNDER SECTION 194A

(i) At the time of credit of such sum to the account of the seller; or

(ii) At the time of payment thereof by any mode

Whichever is earlier.

 Rate of Tax to be deducted :

1. If PAN and Aadhar available of the seller- 0.1% of the purchase value exceeding Rs. 50 lakhs.
2. If PAN and Aadhar not available of the seller- 5% of the purchase value exceeding Rs. 50 lakhs.

 Definition of Buyer:

“Buyer” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out.

 Non-Applicability of Section 194Q:

The provisions of this section shall not apply to a transaction on which

 (a) tax is deductible under any of the provisions of this Act; and

(b) tax is collectible under the provisions of section 206C except 206C(1H) (U/S 206C(1H), seller is required to collect  TDS @ 0.1 % if seller’s T/O is more than 10 crore rupees).

Non-compliance of section 194Q

As per section 40a(ia) of Income Tax Act 1961, dis-allowance to the extent of 30% of the value of transaction. It means that if the buyer fails to deduct and deposit TDS as applicable then dis-allowance shall be restricted to 30% of the amount of expenditure on which TDS is not deducted and deposited.