Effective from 1st October 2024, issue of certificates under Section 197 (lower deduction / collection) has been extended to include Sections 194Q and 206C. This change is a landmark as it provides relief to businesses involved in the purchase of goods.
What is the Change?
Previously, certificates under Section 197 for lower TDS/TCS were not applicable to transactions covered under Section 194Q and Section 206C.
Starting from 1st October 2024, this benefit has been extended to both these sections. This means that eligible businesses can now apply for and obtain a certificate under Section 197 to benefit from lower TDS/TCS rates on transactions involving the purchase of goods.
Understanding Sections 194Q and 206C
- Section 194Q: This section pertains to TDS on the purchase of goods. Businesses making purchases exceeding a certain threshold from a seller were required to deduct TDS at the applicable rate.
- Section 206C: This section deals with TCS on the sale of certain goods, where the seller is required to collect tax from the buyer at the time of sale.
Impact of the Extended Applicability
The extension of lower TDS/TCS applicability under Section 197 to Sections 194Q and 206C is expected to have several positive effects:
- Improve Cash Flow: The purchasers / sellers of goods are likely to experience more robust cash flow, allowing for better financial flexibility.
- Enhanced Business Operations: The improved liquidity will enable businesses for better utilization of resources for growth.