Section 194Q Income Tax
Section 194Q Income Tax is Inserted by the Finance Act, 2021, w.e.f. 1-7-2021. You also needs to refer Income Tax rules 30, 31, 31A, 37BA and Form Nos. 16A, 24G, 26B, 26Q and 27A. . Also Refer Circular No. 13/2021, dated 20-6-2021 (Guidelines under section 194Q) and Circular No. 20/2021, dated 25-11-2021 [Guidelines under section 194Q(3)].
Section 194Q Income Tax Act
Deduction of tax at source on payment of certain sum for purchase of goods.
194Q. (1) Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent of such sum exceeding fifty lakh rupees as income-tax.
Explanation.—For the purposes of this sub-section, “buyer” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out, not being a person, as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.
(2) Where any sum referred to in sub-section (1) is credited to any account, whether called “suspense account” or by any other name, in the books of account of the person liable to pay such income, such credit of income shall be deemed to be the credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
(3) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty.
(4) Every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and the person liable to deduct tax.
(5) The provisions of this section shall not apply to a transaction on which—
Who is Buyer for Section 194Q of Income Tax Act
A buyer is obliged to deduct tax on payment of any sum to any resident for purchase of any goods. “Buyer” is defined by Explanation to section 194Q(1) and it means:
| ♦ | a person whose total turnover from the business carried out by him exceeds Rs. 10 cr. during the financial year immediately preceding the financial year in which the purchase of goods is carried out; and | |
| ♦ | he is not a specified person under the notification as may be issued by the Central Government in the Official Gazette. |
To illustrate, M/s. B Ltd is required to make payment to a vendor in respect of goods purchased exceeding Rs. 50 lakhs by him during financial year 2022-23; if its total turnover of the business is more than Rs. 10 cr. during financial year 2021-22, he would be considered as buyer and accordingly, he should deduct tax on such payment subject to threshold limit (discussed later).
It is provided that Central Government by notification in Official Gazette may specify certain person(s) who would not be regarded as buyer for the purpose of the section subject to certain conditions.
Section 206C(1H) requires collection of tax at source on receipt of consideration for sale of any goods wherein the definition of buyer excludes certain persons namely, the Central Govt. is empowered to notify any person who shall not be treated as buyer a person importing goods into India, Central Government, State Government, an embassy, High Commission, legation, commission, consulate, trade representative of foreign state, local authority or any other notified person.
Section 206C(1H) also applies on a similar transaction and under the similar circumstances; thus, it appears that aforesaid persons may also be excluded by notification from the definition of the buyer under section 194Q.
Thus, the buyer would not include:
| ♦ | Any person not carrying on business; | |
| ♦ | Any person carrying on profession; | |
| ♦ | Any person carrying on business whose total turnover does not exceed Rs. 10 cr. in preceding financial year; and | |
| ♦ | Person(s) notified by Central Government. |
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