1 / 8

Section-194Q-and-Section-206C1H-2

The Finance Act 2021 inserted a new section, Section 194Q, providing for Tax Deducted at Source (u201cTDSu201d) on purchase of<br>goods with effect from July 1, 2021. This section is similar in structure to Section 206C(1H) which was introduced through<br>Finance Act 2020, to collect tax at source on consideration received from the buyer.<br>

skpnassociates
Download Presentation

Section-194Q-and-Section-206C1H-2

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. 194Q Introduction of Section 194Q

  2. Introduction Section 194Q The Finance Act 2021 inserted a new section, Section 194Q, providing for Tax Deducted at Source (“TDS”) on purchase of goods with effect from July 1, 2021. This section is similar in structure to Section 206C(1H) which was introduced through Finance Act 2020, to collect tax at source on consideration received from the buyer. Provision of section 194Q : As per provisions of section 194Q of the Income Tax Act, TDS is deductible if- A] The buyer is responsible for making payment of a sum to the resident seller; and B] Such payment is to be done for the purchase of goods of the value/ aggregate of the value exceeding Rs. 50 Lacs. The buyer is liable to deduct TDS at the rate of 0.1% of the purchase value above Rs. 50 Lacs. Note: In case the Permanent Account Number (PAN) of the seller is not available. Then, the buyer would be liable to deduct tax @ 5%. www.skpn.in 02

  3. Explanation of the term 'Buyer'- As per explanation to section 194Q, the term 'Buyer' means as under-. A person having total sales/ gross receipts/ turnover exceeding Rs. 10 Crores in the immediately preceding financial year in which the specified purchase of goods took place, Buyer will not include any person notified by the Central Government. Example Total turnover of ABC Ltd for the Financial Year 2020-21 is Rs. 15 Crores and ABC Ltd has purchased goods from XYZ Ltd during the year 2021-22 is of Rs. 54 Lakhs. Following is the situation of TDS in given case Buyer Turnover i.e. Turnover of ABC Ltd Exceeding 10 Crores in Previous FY Exceeding Rs. 50 Lacs i.e. Rs. 54,00,000 Value of Goods Purchased Taxable Value Rs. 4,00,000 (54,00,000-50,00,000) TDS on Total Value(If PAN of seller is available) Rs. 400 (4,00,000*0.1%) TDS on Total Value(If PAN of seller is not available) Rs. 20,000 (4,00,000*5%) www.skpn.in 03

  4. Time of tax deduction on the purchase of goods under Section 194Q: I) TDS on purchase of goods is to be deducted by the buyer within earlier of the following dates- Ÿ At the time of credit of the sum into the account of the seller i.e. when invoice is raised; or Ÿ At the time of payment of the sum thereof i.e. Payment against Invoice either as an Advance or regular Payment . ii) Section 194Q is applicable from the date of 1st July, 2021 therefore any Invoice raised on or after 1st July 2021 and any payment done on or after 1st July, 2021. iii) Threshold limit of fifty lakh rupees for applicability of TDS under section 194Q shall be computed from 1 st April, 2021. Hence, if a person being buyer has already credited or paid fifty lakh rupees or more up to 30th June 2021 to a seller, the TDS under section 194Q shall apply on all credits or payments during the previous year, on or after 1st July 2021 , to such seller. Non-Applicability: TDS provisions covered under section 194Q are not applicable under the following cases- Ÿ Transactions on which TDS is already deductible under other provisions of the Income Tax Act; or Ÿ Transactions on which TCS is collectable as per provisions of section 206C [other than a transaction on which TCS is collectable under section 206C(1H)] www.skpn.in 04

  5. Section 194Q VS Section 206C(1H) Purchaser (Assuming Turnover more than Rs.10 crores in preceding year) Purchases more than Rs.50 lacs from single seller Purchases less than Rs.50 lacs from single seller Purchaser will deduct TDS under section 194Q No TDS, No TCS Seller (Assuming Turnover more than Rs. 10 Crores in preceding year) Collection more than Rs. 50 Lacs from single seller Collection more than Rs. 50 Lacs from single seller If buyer is having turnover more than Rs. 10 crores in preceding year If buyer is having turnover less than Rs. 10 crores in preceding year No TDS, No TCS Buyer will deduct TDS under section 194Q So No TCS by seller Seller to collect TCS under section 206C(1H) So No TCS by buyer www.skpn.in 05

  6. Example 1 Amt. received or paid or credited for sale or purchase of Goods in previous year (in Lacs) Turnover of Seller (in crore) for F.Y. 2020-21 Turnover of Buyer (in crore) for F.Y. 2020-21 Taxable amount in Lacs Whether PAN is available TDS or TCS Liable Person Applicable Section Explanation for Applicability Total From Before 1st July 2021 Turnover during F.Y. 2021-22 1st July 2021 Buyer PAN Available Buyer Turnover less than 10 Crore 11 9 40 15 55 5 TCS@0.1% Seller 206C(1H) Buyer Turnover less than 10 Crore Buyer PAN Not Available 11 9 60 0 60 10 TCS@1% Seller 206C(1H) Buyer Turnover exceeding Rs. 10 Crore Sellers PAN Available 9 11 25 35 60 10 TDS@0.1% Buyer 194Q Sellers PAN Not Available Buyer Turnover less than 10 Crore 9 11 60 40 100 40 TDS@5% Buyer 194Q Sellers PAN Available Exclusion Provided under Sec 206C(1H) 75 80 155 80 TDS@0.1% Buyer 194Q 11 11 Sellers PAN Not Available 20 45 65 15 TDS@5% Buyer 194Q 11 11 Exclusion Provided under Sec 206C(1H) Note: Accordingly with respect to TDS under section 194Q of the Act, it is clarified that when tax is deducted at the time of credit of amount in the account of seller and in terms of the agreement or contract between the buyer and the seller, the component of GST comprised in the amount payable to the seller is indicated separately, tax shall be deducted under section 194Q of the Act on the amount credited without including such GST. However, if the tax is deducted on payment basis because the payment is earlier than the credit, the tax would be deducted on the whole amount as it is not possible to identify that payment with the GST component of the amount to be invoiced in future. www.skpn.in 06

  7. Comparison of the provision of Section 194Q and 206C(1H) of Income Tax Act, 1961 Particulars 194Q (TDS) 206C(1H) (TCS) Tax to be DEDUCTED Tax to be COLLECTED Purpose Applicable to Buyer/Purchaser Seller With Effect From 01/07/2021 01/10/2020 When Deducted or Collected Payment or credit, whichever is earlier At the time of receipt TCS shall be collected on advance receipts TDS shall be deducted on advance payments made Advances Rate of TDS/TCS 0.1% 0.1% Rate if PAN not available 5% 1% Turnover/Gross Receipts/Sales from the business of BUYER should exceed Rs.10cr during previous year (Excluding GST) Purchase of goods of aggregate value exceeding Rs.50Lakhs in P.Y. (The value of goods includes GST) Turnover/Gross Receipts/Sales from the business of SELLER should exceed Rs.10cr during previous year (Excluding GST) Sale consideration received exceeds Rs.50Lakhs in P.Y. (The value of goods includes GST) Triggering point When to deposit deducted TDS & collected TCS to Govt. TDS to be deposited to Government by 7th day of subsequent month and by 30th April in case of March month TCS to be deposited by 7th day of subsequent month and by 30th April in case of March month Quarterly statement to be filed 26Q 27EQ Certificate to be issued to seller/buyer FORM 16A FORM 27D The buyer shall deduct TDS u/s 194Q if the purchase value exceeds Rs. 50 Lakhs. In this case, the seller will not collect TCS u/s 206C(1H) The seller shall collect TCS u/s 206C(1H) only if the buyer is not liable to deduct TDS or the buyer has not deducted TDS u/s 194Q. Preference of TDS or TCS www.skpn.in 07

  8. Baner Tilak Road 1600, Ground Floor, Ramakrushna Appt, 1601, Sadashiv Peth, Pune 411030 Hinjewadi Office No. 707, White Square, Wakad Road, Near Wakad Bridge, Hinjawadi, Pune, 411057 Daffodil, Bungalow No 2, Prathmesh Park Society Society, Baner, Pune 411045 Chinchwad Kunal Plaza, Office No 51, 3rd Floor, Chinchwad Station Rd, Pune, 411019 Kopargaon Chetak, 2061 Gurudwara Road Kopargaon 423601 Contact Us www.skpn.in (+91) 9096404907 contact@skpn.in Disclaimer: This material and the information contained herein prepared by S K P N & Associates is intended to provide general information on TDS on purchase of goods and is not exhaustive. We are not providing any professional advice or service by means of the above information. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult with us or any other qualified professional adviser. www.skpn.in

More Related