The concept of TDS confirms regular inflow of tax collection to the government. Deduction of TDS is help collection of tax directly in source of income itself in country. It help to taxpayer simplified their burden on TDS to getting include in return filling of Income Tax at time of paying tax. At time of return filling taxpayer can take the credit of taxes deducted at sources.

In The Finance Act, 2021 Government introduced Section 194Q of the Income-tax Act, 1961 Where TDS is related to the transaction of purchase of goods at a set Limit.

Rate of taxes and its Applicability:

As introduction of Section 194Q applicability on buyer at purchase of goods in where such following cases:

  • Where a buyer make such payment is done  for related purchase of goods of aggregate or sum total value is exceeding the limit of Rs. 50 lakh in previous year;
  • A buyer where its responsibility for making a payment of sum to a resident seller; and
  • When buyer means a person whose total sales, gross receipt or turnover from business exceeds Rs. 10 Crores between the financial year in immediate preceding previous financial year in which purchase of goods is follow out.

TDS rate where such rate is applicable at deduction of source rate of 0.1% on the amount exceeding Rs. 50 Lakhs in a financial year from seller where the buyer has purchased goods worth more than Rs. 50 Lakhs.

(Note: If such cases when seller fails to furnish a PAN to buyer, the TDS would be charge 5% instead of 0.1%.

Applicability of TDS section 194Q of the ITA is from July 1st, 2021 means the tax is applicable only or on after the transaction of after July 1st, 2021. However threshold limit of purchase Rs. 50 lakhs has taken in account from April 1st, 2021.)

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Time of deduction:

Tax deducted at time for-

  • At the Time of credit of such sum at account of seller; or
  • At time of payment in cash/cheque or by any other mode;

Whichever is earlier.


Related to this if any such sum is credited to any account, whether its suspense account or by any other name, in books of account of liable person such crediting is charged or deduct tax accordingly.

    Threshold limit

    • The deduction of tax at such cases held where if the amount or such sum of payment of purchase of goods credited in financial year exceed Rs.50 lakhs in previous year;


      (Example: If payment of purchase of goods worth Rs. 70 lakhs from a seller, then the basic limit deduction on charged after removing basic limit of Rs.50 lakhs and the remaining balance of Rs.20 lakhs is charge or deducted accordingly at rate of 0.1% on this under Section 194Q. So, the TDS will be Rs.2000)

    Non-applicability of TDS u/s 194Q

    Non applicability of TDS on such transaction on which-

    • Deductible Tax under any provision of Act;
    • Tax is collectable u/s 206C, other than section 206(1H);

    However, in such type of cases where transaction to which both section 206(1H) and section 194Q applies, in that cases TDS u/s 194Q deduction of tax Is necessary.

    • In case where transaction implies both Section 206(1)/(1F)/(1G) and 194Q applies, TCS to be collected u/s 206(1)/(1F)/(1G).
    • In case where transaction implies both Section 194-O and 194Q applies, in that cases TDS u/s 194-O deduction of tax is necessary.

    In other cases where if PAN is not furnish 20% charge deductible, however in 194Q charges implies 5% TDS on transaction.

      • TDS u/s 194Q not applicable on GST amount if its separately indicated in invoice,

      But if advance payment made then TDS should be deduct on total advance payment;

      • At time of payment of purchase of goods TDS already deductible by buyer therefore if in case of Purchase return there is no need to return TDS amount and it can adjusted against the payment of future purchase in case of same seller, however if not same then no adjustment made for future transactions.