All About TDS on Purchase of Goods – Sec. 194Q of Income Tax Act
The Finance Act 2021 has introduced a new section 194Q which is effective from 1 July 2021 to provide for deduction of tax by the buyer from seller on the transaction of purchase of goods. The applicability of section 194Q from the buyer side and section 206C(1H) on the seller side would create a lot of confusion and increase the compliance burden for both the parties.
In the last financial year 2020-21 the Finance Act 2020 was amended and section 206C of the Income-tax Act, 1961 was brought in to widen the income tax base in India. A new sub-section (1H) was inserted for collection of tax at source (TCS) with effect from 1 October 2020. It was introduced to collect TCS @0.1% of the Sale consideration at the time of receipt where sale consideration exceeds Rs.50 Lakhs in any previous year. The TCS was collected by the seller from buyer.
Applicability of Section 194Q
Section 194Q – TDS on Purchase of Goods
This section is applicable to only those buyer’s whose total sales, gross receipts or turnover from the business exceeds Rs. 10 crore during the financial year immediately preceding the financial year in which the purchase of goods has been carried out.