• By ADMIN
• Posted 17 Jun, 2021
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TDS on Purchases from 01.07.2021

It is to be noted that a new provision (Sec 194Q) for TDS on purchase transaction was introduced by Finance Act, 2021 which are effective from 01.07.2021. This section states that whoever had exceeded turnover of Rs.10 Crores in the previous year (2020-21) is required to deduct tax at source on the value of purchase of goods or services from a person for aggregate value of INR 50 lakhs in 2021-22. The tax to be deducted at source on the value exceeding INR 50 lakhs. The following are the key points to be kept in mind while deducting tax at source in this regard:-

1. The deductor's previous year's turnover must be more than INR 10 Crores 

2. Purchase value in current year must be more than INR 50 lakhs 

3. TDS rate 0.1% on amount exceeding INR 50 Lakhs. (Example. If total purchase value INR.75 lakhs then TDS to be deducted on INR 25 lakhs). There are higher rate of TDS prescribed when certain conditions are not fulfilled like u/s 206AB of the Act.

4. The deductee (seller) must be a "Resident" 

4. This TDS is not required to be deducted when other TDS or TCS provisions are applicable

5. This TDS is to be deducted irrespective of TCS u/s 206C (1H) collected by the seller. But when TDS deducted under this section then no TCS u/s 206C(1H) is required. Hence, entities has to exchange thier position by way of letters and taking declaration etc. [Model Letters]

Eventhoug the section is clear as to the application and celling limits, it is not sure as to how to computation of limit of INR 50 lakhs to be done and is it from 01.04.2021 or from 01.07.2021 etc, for which we need to seek clarification from CBDT.

Note: Entities has to