Guidelines under section 194Q of the Income-tax Act, 1961 – CBDT Circular dated 30 June 2021

Finance Act, 2021 inserted a new section 194Q in the Income-tax Act 1961 (hereinafter referred to as “the Act”) which takes effect from I st day of July, 202 I. It applies to any buyer who is responsible for paying any sum to any resident seller for purchase of any goods of the value or aggregate of value exceeding fifty lakh rupees in any previous year. The buyer, at the time of credit of such sum to the account of the seller or at the time of payment, whichever is earlier, is required to deduct an amount equal to 0.1 % of such sum exceeding fifty lakh rupees as income tax.

Buyer is defined to be person whose total sales or 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 good is carried out. Central Government has been authorised to specify by notification in the Official Gazette, person who would not be considered as buyer for the purposes ofthis section.

Sub-section (3) of section 194Q of the Act empowers the Board (with the approval of the Central Government) to issue guidelines for the purpose of removing difficulties. Various representations have been received by the Board for issuing guidelines for removing certain difficulties. In exercise of power contained under sub-section (3) of section 194Q of the Act, the Board, with the approval of the Central Government, hereby iss’ues the following guidelines. These guidelines at some places have also tried to remove difficulties in implementing the provisions of section 194-0 and sub-section (I H) of section 206C of the Act using power contained in sub-section (4) of section 194-0 of the Act and sub-section (II) of section 206C of the Act.

Refer YouTube video link on Guidelines under section 194Q of the Income-tax Act, 1961Circular No. 13 of 2021 | Dated: 30th June, 2021

Issue clarified under guidelines

1. Applicability on transactions carried through various Exchanges

2. Calculation of threshold for the financial year 2021-22

3. Adjustment for GST, purchase returns

4. Whether non-resident can be buyer under section 194Q of the Act?

5. Whether tax is to be deducted when the seller is a person whose income is exempt

6. Whether tax is to be deducted on advance payment?

7. Whether provisions of section 194Q of the Act shall apply to buyer in the year of incorporation?

8. Whether provisions of section 194Q of the Act shall apply to buyer if the turnover from business is 10 crore or less?

9. Cross application of section 194-0, sub-section (111) of section 206C and section 194Q of the Act.

Refer copy of circular:

Clarification for use of functionality under section 206AB and 206CCA of the Income-tax Act, 1961 (Press release dated 22 June 2021)

Finance Act, 2021 inserted two new sections 206AB and 206CCA in the Income-tax Act 1961 which takes effect from 1st day of July, 2021. These sections mandate tax deduction or tax collection at higher rate in case of certain non-filers (specified persons). Higher rate is twice the prescribed rate or 5%, whichever is higher.

To implement these two provisions, tax deductor/collector was required to do a due diligence of satisfying himself if the deductee/collectee is a specified person. This would have resulted in extra compliance burden on such tax deductor/collector. To ease this compliance burden the Central Board of Direct Taxes has issued a new functionality “Compliance Check for Sections 206AB & 206CCA”. This functionality is already functioning through reporting portal of the Income-tax Department (

The tax deductor/collector can feed the single PAN (PAN search) or multiple PANs (bulk search) of the deductee/ coIIectee and can get a response from the functionality if such deductee/collectee is a specified person. For PAN Search, response will be visible on the screen which can be downloaded in the PDF format. For Bulk Search, response would be in the form of downloadable file which can be kept for record.

The logic of the functionality has been explained through CBDT Circular No. 11 of 2021 dated 21st June, 2021 available at ( The Circular has further eased the burden of the tax deductors/collectors by ensuring that the deductors/collectors need to check the PAN in the functionality at the beginning of the financial year without there being any need to check the PAN of the non-specified person again during that financial year.

With this new functionality, the Government has reiterated its commitment to ease the compliance burden of taxpayers.