Applicability of Section 194Q Of The Income Tax Act1961.

Applicability of Section 194Q Of The Income Tax Act1961.

Introduction  
Section 194Q was introduced in the Finance Act, 2021, and became effective from July 1, 2021. This section mandates that certain buyers must deduct TDS (Tax Deducted at Source) on the purchase of goods if specific conditions are met. This provision aims to widen the tax base and ensure better compliance in high-value transactions.
Applicability of Section 194Q
A buyer is required to deduct TDS @ 0.1% under Section 194Q if the following conditions apply:

✅ Who is Liable?  
- The buyer's total turnover or gross receipts in the preceding financial year must be ₹10 crores or more.

✅ When to Deduct TDS?  
- When the buyer purchases goods worth ₹50 lakhs or more from a single seller in the current financial year.

✅ Rate of TDS:  
- 0.1% of the purchase amount exceeding ₹50 lakhs.  
- If the seller does not have a PAN, TDS @ 5% will be applicable.

Exemptions: When is TDS under Section 194Q NOT Applicable?

TDS under Section 194Q is NOT applicable in the following cases:

❌ If TDS is already deducted under any other section of the Income Tax Act.  
❌ If TCS (Tax Collected at Source) under Section 206C(1H) is already collected by the seller.  
❌ If the transaction involves import/export transactions, i.e., the seller is a non-resident.  

Example Calculation  Let’s assume a buyer purchases goods worth ₹70 lakhs from a seller in a financial year.