TDS on Purchase of Goods Exceeding 50 Lakhs | 194Q Of Income Tax Act
Applicability: a person, being a buyer who is liable for paying any sum to any seller (being a resident) for purchase of any goods (including capital goods), where the worth or aggregate of such values, exceeds ₹50 lakhs in any fiscal year, shall deduct TDS. Effective from 1st July 2021.
Rate of TDS: 0.1% (5% just in case PAN isn't furnished) of the acquisition value exceeding ₹50 lakhs.
Explanation: the worth on which TDS shall be charged is that the sum left after deducting ₹50 lakhs from the entire value.
Time of Deduction: Earlier of the following:
• At the time of credit of such amount to the account (even if Suspense A/c) of the seller
• At the time of payment by any medium
Conditions for Deduction:
The tax shall be deducted only the subsequent conditions are satisfied:
• Purchase of goods from a resident seller
• Goods are purchased for a worth or aggregate useful exceeding ₹50 lakhs in any fiscal year
• The person buying shall fall under the meaning of buyer as provided for this section
Buyer: A buyer is a person whose total sales, gross receipts, or turnover from the business, is more than ₹10 crores during the financial year immediately proceeding the fiscal year when the goods have been purchased. Further, the Central Government may, by notification within the Official Gazette, specify the list of persons who shall not be considered as buyers for this matter.
Note: There’s no such clarification for the inclusion of GST in the total value of goods. Thus, for the aim of computing the entire turnover, GST will be included.
Role of Buyer/Seller:
Buyer: buyer will deduct TDS
Mr Sujit Bala is a founder & Director of Tax Seva Kendra.in. He has more than 10 years of experience in the field of Accounts, Taxation and Company law matters.