TDS on Purchase of Goods
Introduction
TDS must be deducted under section 194Q at 0.1% on payments made to a resident seller for the purchase of goods if the buyer’s turnover exceeds Rs. 10 crore in the preceding financial year and the total purchase value exceeds Rs. 50 lakh in a financial year.
Key Provisions
- Deductor:
o A buyer engaged in business with turnover exceeding Rs. 10 crore in the previous financial year immediately preceding the financial year in which such goods are purchased.
- Deductee:
o A resident seller receiving payment for goods.
- Threshold:
o TDS applies only to purchases exceeding Rs. 50 lakh in a financial year.
- Time of Deduction:
o At the time of credit or payment, whichever is earlier.
Rate of TDS
- 0.1% on purchase value exceeding Rs. 50 lakh.
- Higher rates apply if PAN is not provided (Section 206AA)
CBDT Guidelines
The CBDT has issued guidelines, vide Circular No. 13 of 2021, dated 30-06-2021 and Circular No. 20 of 2021, dated 25-11-2021, to address various difficulties and clarify several doubts.
Exemptions from TDS
- Transactions with the Government:No TDS if the seller is the Central or State Government. [[Circular No. 20/2021, dated 25-11-2021]
- International Financial Services Centre (IFSC) Units:No TDS on purchases from IFSC units engaged in aircraft or ship leasing. [Notification No. 3/2025, dated 02-01-2025]
Compliance Requirements
- Lower/Nil Deduction Certificate:
o Available under Section 197 (w.e.f. 01-10-2024).
o Self-declaration under Section 197A is not allowed.
- Deposit of TDS:
o Challan ITNS 281 within 7 days from the end of the deduction month.
o For March deductions, deposit by 30th April.
o Government offices depositing TDS without a challan must deposit the TDS on the same day on which the tax was deducted.
- TDS Statement Filing: Quarterly submission inForm 26Q.
- TDS Certificate:Form 16A must be issued within 15 days from the due date of TDS statement filing.
Consequences of Non-Compliance
- Failure to Deduct or Deposit TDS:
o Interest liability under Section 201.
o Penalty under Section 271C (up to the non-deducted amount).
o Prosecution under Section 276B.
- Failure to Furnish TDS Statement:
o Rs. 200 per day penalty under Section 234E (limited to TDS amount).
o Additional penalties under Sections 271H and 272A.
- Failure to Issue TDS Certificate:Penalty under Section 272A.