July 1, 2023
The Finance Act, 2021, introduced Section 194Q of the Income-tax Act, 1961, which is related to Tax Deducted at Source (TDS) on purchase of goods and not to the provisions of services. According to the section a buyer whose turnover or gross receipt or sales in the immediately preceding financial year was more than Rs 10 crore, then the purchaser needs to deduct TDS from their resident seller on the purchase of goods above Rs 50 lakh.
Tax is to be deducted at source at the rate of 0.1% on the amount exceeding Rs 50 lakh in a financial year from a seller from whom the buyer has purchased goods worth more than Rs 50 lakh.
In cases where a seller fails to furnish a Permanent Account Number (PAN) to a buyer, the TDS would be deducted at the rate of 5% instead of 0.1%.
The TDS is to be deducted at a time when such amount is credited to the seller or paid to him, whichever is earlier.
In other words, if you have not paid any advance amount, then you have to deduct this TDS at the time of purchase of goods. However, if you have made an advance payment, then you have to deduct TDS immediately.
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