Income Tax TDS ALERT! Section 194Q Introduced; TDS chargeable on above Rs 50 lakh buyer-seller transactions after THIS date - Know more details here

The Central Board of Direct Taxes (CBDT) has inserted a new Section 194Q in the Income-tax Act 1961 on Wednesday, 30 June. This section will take effect from July 1, 202I. It applies to buyers, who are responsible for paying any sum to any resident seller for the purchase of any goods of the value or aggregate of value exceeding Rs 50 lakh in any previous year. 

The buyer, at the time of credit of such sum to the account of the seller or at the time of payment, whichever is earlier, is required to deduct an amount equal to 0.1 per cent of such sum exceeding Rs 50 lakh as income tax.

See Zee Business Live TV Streaming Below:

A buyer whose total sales or gross receipts or turnover from the business carried on by him exceed Rs 10 crore during the financial year immediately preceding the financial year in which the purchase of good is carried out. Central Government has been authorised to specify by notification in the Official Gazette, the person who would not be considered as buyer for the purposes of this section.

CBDT issues Circular No.13 of 2021 dated 30th June, 2021 detailing guidelines under section 194Q of Income-tax Act,1961(TDS on purchase of goods), effective from 01.07.2021.
The said Circular may be accessed at:https://t.co/XKXnqdxKXR@nsitharamanoffc@Anurag_Office@FinMinIndia

— Income Tax India (@IncomeTaxIndia) June 30, 2021

CBDT clarified that the various representations have been received by the Board for issuing guidelines for removing certain difficulties. In exercise of power contained under sub-section (3) of Section 194Q of the Act, the Board, with the approval of the Central Government, hereby issues the following guidelines. These guidelines tried to remove difficulties in implementing the provisions of Section 194-0 and sub-Section (I H) of Section 206C of the Act using power contained in sub-section (4) of section 194-0 of the Act and sub-section (II) of section 206C of the Act.  

It has been represented that there are practical difficulties in implementing the provisions of Tax Deduction at Source (TDS) contained in section 194-Q of the Act in case of certain exchanges and clearing corporations.  

It has been stated that sometime in these transactions there is no one-to-one contract between the buyers and the sellers. In order to remove such difficulties, it is provided that the provisions of Section 194Q of the Act shall not be applicable in relation to:  

Transactions in securities and commodities, which are traded through recognised stock exchanges or cleared and settled by the recognized clearing corporation, including recognised stock exchanges or recognised clearing corporation located in International Financial Service Centre;  
Transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges registered in accordance with Regulation 21 of the CERC.  

Calculation of threshold for the financial year 2021-22 

Since Section 194Q of the Act would come into effect from 1st July, 2021, CBDT has clarified how the threshold of Rs 50 lakh specified under this section shall be computed and whether the tax is required to be deducted in respect of advance paid before 1st July 2021 and sum credited thereafter. 

Since Section 194Q of the Act mandates buyer to deduct tax on credit of sum in the account of seller or on payment of such sum, whichever earlier, the provision of this sub-section shall not apply on any sum credited or paid before Ist July 2021. If either of the two events had happened before 1st July 2021, that transaction would not be subjected to the provisions of section 194Q of the Act.  

Since the threshold of Rs 50 lakh is with respect to the previous year, calculation of sum for triggering TDS under section 194Q shall be computed from 1st April, 2021. Hence, if a person being buyer has already credited or paid Rs 50 lakh or more up to 30th June 2021 to a seller, the TDS under section 194Q shall apply on all credit or payment during the previous year, on or after Ist July 2021, to such seller.