TDS on Purchase of Goods: Section 194Q

In this blog, we will see the functionality of how TDS will be applied on Purchase Invoices in Sage X3 for Section 194Q of the Income Tax Act.

As per the requirement, the TDS rate of 0.1% is applicable to be deducted if the value or aggregate purchase value exceeds Rs. 50 Lakhs. This will also be only effective on current ongoing fiscal year of TDS module.

For this purpose, there will be a checkbox “Threshold” in TDS section as shown in the below screenshot. If it is checked then only TDS on Purchase of Goods functionality will work.

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[TDS Section - Threshold]
[TDS Section – Threshold]

Now, we will define a new NOD code as ‘NOD194Q’ which will have 0.1% as TDS rate and cumulative cut-off value of INR 50 Lakhs and TDS section 194Q. In the same screen, we will enter the amount for Threshold for calculation purpose.

[NOD194Q]
[NOD194Q]

This NOD will be mapped to required Party Vendors.

[Party Details - SD0018]
[Party Details – SD0018]

TDS will be deducted on different amounts unlike the default functionality which deducts TDS on Total cumulative amount.

Let’s check with an example:

Threshold Cut-off is 50,000,00. We will create new invoice entry with the same party vendor and invoice value of 30 Lakhs.

TDS Effect: No TDS will be deducted because Invoice value is 30 Lakhs which is less than threshold cut-off. Refer below screenshot.

[1012107PINV00023 - 30 Lakhs]
[1012107PINV00023 – 30 Lakhs]

We will again create an invoice with invoice value of 21 Lakhs for the same party vendor.

TDS effect: TDS 0.1% will be deducted on 1 lakh. TDS Entry will be created i.e. 0.1% on 1 lakh.

[1012107PINV00024 - 21 Lakhs]
[1012107PINV00024 – 21 Lakhs]

If you have observed in the below screenshot, in the section highlighted in red, values are getting displayed as per the default TDS functionality which deducts TDS on Total amount i.e. 0.1% on 21 Lakhs. But, in the section which is highlighted in yellow, values are getting displayed as per the Threshold functionality which deducts TDS with 194Q Section.

[1012107PINV00024 - TDS Base Amount]
[1012107PINV00024 – TDS Base Amount]

This calculation of TDS deduction will be completely based only on Vendor code, NOD code and fiscal year combination.

If other than the mentioned NOD code is used then it will work as per the default functionality i.e. if above example is to be considered then TDS will be applicable on Total Invoice values 30 Lakhs and 21 Lakhs respectively.

In this way, TDS will be deducted for Invoices in TDS on Purchase of Goods (Threshold) functionality

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