Brief Description on Section 194Q

As per Section 194Q the buyer, whose turnover or gross receipts or total sales is exceeding Rs. 10 crores
in a financial year immediately preceding the relevant financial year, shall be liable to deduct tax at rate
of 0.1% on the value exceeding Rs. 50 lakhs at the time of: -

making payment to seller, or

whichever is earlier
credit of such value to the account of seller,

A dd iti onally, the lim it of Rs. 50 lakhs shall be taken in to account on th e valu e o f
any go od s o r aggregate of su ch value in a finan cial year.

Correspo ndingly, if the seller doesn’t provide PA N /A adhar (as per

M em o randum explain in g the provisions in the Finance B ill, 202 1) then rate
of ded ucti n g tax shall be consid ered as 5 % .

A nd as per su b-secti on 2 o f secti on 19 4Q , the p rovisions of this se ction shall

apply accordingly in the case w h ere such value is credited in the books o f
pe rson liable to p ay such value , in the acco unt, w heth er called “suspense
account” or by any other nam e.
Section 194Q was introduced in the Budget of 2021-22 and has come into effect from 1 st July, 2021.
However, the CBDT has said that this provision would not be applicable on share or commodity
transaction done through recognised stock exchange or cleared & settled by the recognised clearing
corporation.

Likewise, as per sub-section 5 of section 194Q, the provisions of this section shall not apply to
transactions on which: -

tax is deductible under

any other provision of tax is collectible under
this Act, and provisions of Section 206C
but excluding transactions
to which 206C(1H) applies.

Therefore, provisions of Section 194Q shall apply on the transactions in the case of potential overlap
between Section 194Q and Section 206C(1H).
Further clarifications
Whether threshold limit be inclusive Which section will prevail for Are capital goods also covered under
or exclusive of GST?
Threshold limit of Rs. 10 crores
shall be excusive of GST and Rs.
50 lakhs shall be inclusive of
GST.
deducting/collecting tax in case of
this provision?
potential overlap between sections?
No requirement of TDS u/s
194Q on a transaction where tax
is deductible under any other
provision or TCS is collectible
under section 206C but
excluding 206C(1H).
TDS u/s 194Q shall prevail in
case of potential overlap
between TDS u/s 194Q and TCS
u/s 206C(1H). Therefore, both
TDS u/s 194Q and TCS u/s
206C(1H) will not apply on the
same transaction.
Yes, any good whose value or
aggregate of such value is
exceeding Rs. 50 lakhs in a
financial year.
The Income Tax Act,1961 does
not define the term “goods” so
one may have to draw reference
from the definition under the
Sale of Goods Act, 1930 wherein
stock and shares are inclusive
while defining the term “goods”.
Nevertheless, the CBDT has said
that this provision would not be
applicable on share or
commodity transaction done
through recognised stock
exchange.
From when this section is applicable and
What is time limit for deduction of TDS under
what about the transactions prior to its
section 194Q?
applicability?

This Section shall be applicable with effect Tax to be deducted at the earliest of the
from 1st July, 2021. following dates:
Since the threshold of Rs. 50 lakh is with
respect to a financial year where calculation time of credit of such value to the account
of sum for checking applicability of this of the seller, or
section shall be computed from 1 st April,
2021. time of payment.
Hence, if a person being buyer has already
credited or paid Rs. 50 lakhs or more up to
30th June, 2021 to a seller, then provisions of
Section 194Q shall apply on all credit or
payment during the financial year, on or after
1st July, 2021.