Yes, TDS (Tax Deducted at Source) can be applicable on purchases under specific conditions as per the Income Tax Act.
According to the provided reference, if you buy goods worth more than ₹50 lakhs from a seller in a financial year, a Tax Deducted at Source (TDS) applies under Section 194Q of the Income Tax Act.
Understanding TDS on Purchase of Goods
Section 194Q of the Income Tax Act specifies the conditions under which a buyer is required to deduct TDS on the purchase of goods. This provision was introduced to broaden the tax base.
Here are the key points based on the reference:
- Applicability: TDS is applicable when a buyer purchases goods.
- Threshold Limit: The purchase value must exceed ₹50 lakhs from a single seller during a financial year.
- Section: This requirement falls under Section 194Q of the Income Tax Act.
- Rate: The TDS rate is 0.1% on the amount exceeding ₹50 lakhs.
Let's break down the applicability with an example:
Example Scenario
Suppose you are a buyer and you purchase goods from Seller X during the financial year.
| Purchase Date | Amount (₹) | Cumulative Amount (₹) from Seller X | TDS Applicable? |
|---|---|---|---|
| May 15, 2023 | 30,00,000 | 30,00,000 | No |
| Aug 20, 2023 | 25,00,000 | 55,00,000 | Yes |
In this example, the threshold of ₹50 lakhs is crossed on August 20, 2023, when the cumulative purchase reaches ₹55,00,000. TDS would be applicable on the amount exceeding ₹50 lakhs, which is ₹5,00,000 (₹55,00,000 - ₹50,00,000).
The TDS amount to be deducted would be 0.1% of ₹5,00,000, which is ₹500. For any subsequent purchases from Seller X in the same financial year, TDS at 0.1% would apply to the entire purchase amount (unless another exemption applies, which is not covered in the provided reference).
Key Considerations for Buyers
- Monitor Purchases: Buyers need to track their total purchases from each seller throughout the financial year.
- Identify Applicable Transactions: Once the ₹50 lakh threshold is crossed with a seller, TDS deduction applies to subsequent purchases from that seller in that financial year.
- Deduct and Deposit: The buyer is responsible for deducting the TDS at the specified rate and depositing it with the government within the due dates.
- Issuing TDS Certificates: The buyer must also issue TDS certificates (Form 16A) to the seller as proof of the tax deducted.
This provision makes buyers responsible for deducting tax at source on high-value purchases of goods, ensuring a flow of information and tax collection at an earlier stage.
