TDS/TCS Provisions – Union Budget 2021

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The pragmatic Budget of 2021 introduces new TDS/ TCS provisions with a view to not only minimize tax evasion, insinuate higher TDS/TCS rates in case of non-filing of Income Tax Return, but also for creating trail for the purpose of tax collection.

  • Section 194P – Relaxation from filing ITR (Effective 1st Apr’21)

Senior citizens of age 75yrs and above shall be relieved from filing return of income if the senior citizen furnishes a declaration to the bank that he is a resident of India having only pension income and interest income from the same bank in which he is receiving his pension income. The specified bank shall compute his income and deduct income tax based on rates in force.

  • Section 194Q – Deduction of tax at source on purchase of goods (Effective 1st July’21)

The buyer whose total turnover from business exceed Rs 10Cr during the immediate previous year shall deduct tax at the rate of 0.1% while paying for the goods purchased when aggregate value of goods exceeds Rs.50L in the previous year. The TDS rate shall be 5% if PAN is not furnished.

Section 206 AB/ Section 26 CCA – Tax Deduction/Collection at Higher Rates for Non-filers of IT-Return (Effective 1st July’21)

  • Applicability: Specified person has not filed the ITR for 2 previous years and time limit for filing the return of income under section 139(1) has expired and aggregate TDS/TCS is Rs 50,000 or more in each of the two previous years.
  • Exception: These sections are not applicable if TDS to be deducted u/s 192, 192A, 194B, 194BB, 194LBC or 194N of the Act.

Rate of TDS/TCS: Higher of the Following Rates

  • Twice the rate specified in the relevant provision of the Act
  • Twice the rate or rates in force
  • 5%

Relief for Dividend:

  • Advance-tax liability on dividend income shall arise only after the declaration/payment of dividend.
  • The dividend paid to Real Estate Infrastructure Trusts or Infrastructure Investment Trusts (REIT/InvIT) shall be exempt from TDS.
  Authored by – CA Anushka Saraogi


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