Section 194Q of Income Tax Act for AY 2023-24

Section 194Q of Income Tax Act 1961 inserted by Finance Act 2021 and IT Rules 1962. Deduction of TDS on payment for purchase of goods.

Amended and updated notes on section 194Q of Income Tax Act 1961 as inserted by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to deduction of tax at source on payment of certain sum for purchase of goods.

Chapter XVII (Sections 190 to 234G) of the Income Tax Act 1961-2021 deals with the provisions related to collection and recovery of tax. Section 194Q of IT Act 1961 provides for deduction of tax at source on payment of certain sum for purchase of goods.

Recently, we have discussed in detail section 194P (Deduction of tax in case of specified senior citizen) of IT Act 1961. Today, we learn the provisions of section 194Q of Income-tax Act 1961. The amended provision of section 194Q is effective for financial year 2022-23 relevant to the assessment year 2023-24.

In this article, you will learn detail of the provisions of section 194Q of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962 as provided by Ministry of Law and Justice, Government of India.

Section-194Q: Deduction of tax in case of specified senior citizen

[Section 194Q newly inserted w.e.f. 1-April-2021 by the Finance Act 2021]

Section 194Q(1) of Income Tax Act

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.

CBDT Notification No. 107 /2021, S.O. 3680(E) dated 10.09.2021: With effect from 1-July-2021, Air India Assets Holding Limited (PAN: AAQCA4703M) shall not be considered as ‘buyer’ for the purpose of sub-section (1) of section 194Q of the IT Act 1961 in case of transfer of goods by Air India Limited (PAN: AACCN6194P) to it under a plan approved by the Central Government.

Explanatory Memorandum: It is certified that no person is being adversely affected by giving retrospective effect to this notification.

Section 194Q(2) of Income Tax Act

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.

Section 194Q(3) of Income Tax Act

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.

Section 194Q(4) of Income Tax Act

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.

Section 194Q(5) of Income Tax Act

The provisions of this section shall not apply to a transaction on which –

  • (a) tax is deductible under any of the provisions of this Act; and
  • (b) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies.

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