1)    Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent. of such sum exceeding fifty lakh rupees as income-tax.

Explanation. For the purposes of this sub-section, "buyer" means a person whose total sales, gross receipts or turnover from the business carried on by him exceed Rs. 10 crores during the financial year immediately preceding the financial year in which the purchase of goods is carried out, not being a person, as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.

2)    Where any sum referred to in sub-section (1) is credited to any account, whether called "suspense account" or by any other name, in the books of account of the person liable to pay such income, such credit of income shall be deemed to be the credit of such income to the account of the payee and the provisions of this section shall apply accordingly.

3)    If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty.

4)    Every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income tax authorities and the person liable to deduct tax.

Summary 194Q

A.   Date of Applicability-

This provision will be applicable with effect from 1st July 2021.

B.    Rate of TDS under section 194Q

a)     Buyer of all goods will be liable to deduct tax at source

·        @ 0.1% of sale consideration exceeding INR 50 Lakhs in a Financial Year

b)    Tax to be deducted @ 5%

·        if the seller does not provide PAN/Aadhar (as per Memorandum explaining the provisions in the Finance Bill, 2021).

C.    Turnover for applicability of section 194Q

TDS obligation will be on buyers who have gross receipts/turnover exceeding INR 10 Crores in preceding financial year

D.   Conditions for applicability of section 194Q

a)   TDS obligation will arise

·      if the payment is made to a resident seller

b)  No requirement of TDS u/s 194-Q on a transaction:

·      if TDS is deductible under any other provision or

·      TCS is collectible under section 206C [excluding 206C(1H)]

c)   On a given transaction

·      either TDS u/s 194Q will apply

                          or

·      TCS u/s 206C(1H) will apply

Both TDS u/s 194Q and TCS u/s 206C (1H) will not apply on the same transaction

d)  In case of potential overlap between the two provisions

·        TDS u/s 194Q will apply and TCS u/s 206C(1H) will not apply

E.    Time Limit for deduction of TDS under section 194Q

Tax to be deducted at the earliest of the following dates:

·        time of credit of such sum to the account of the seller

                                       or

·        time of payment