New Section 194Q – TDS on Purchase of Goods (Union Budget 2021)

Applicability: This shall be effective 1st July’21

TDS Rate:

  • 0.1% on amount exceeding Rs 50L
  • 5% if PAN is not furnished

When to Deduct?

  • Assessee deducts while paying for the goods purchased
  • Aggregate value of goods purchased exceeds Rs.50L in the previous year

Deduction by Whom?

  • Tax shall be deducted by the buyer whose total turnover from business exceed Rs 10Cr during the immediate previous year

Consequences of non-deduction by Purchaser:

  • The value of Purchase transactions on which TDS is not deducted will be subject to 30% disallowance

Clarifications:

  • TDS to be deducted on advance payment as well
  • TDS to be deducted on basic amount only, i.e. not on GST value
  • If on a transaction TCS is required under section 206C(1H) as well as TDS under section 194Q, then in respect of that transaction only TDS under section 194Q shall only be carried out

Example: Mr. Todi purchases goods worth Rs 1Cr for his business. Mr. Todi shall track purchases from each supplier and shall deduct TDS @ 0.1% as soon as purchase exceeds Rs 50 lacs. In above case, first Rs. 50L of purchase shall not be subject to TDS and on rest Rs. 50L TDS under section 194Q will be deducted i.e. Rs 5,000. For rest of all the transactions during the year TDS will be deducted for each purchase transaction.

  • This section shall only apply if turnover of Mr. Todi exceeds Rs 10Cr during immediate previous year
  • If the supplier does not furnish his PAN, then TDS rate shall be 5% and not 0.1%
Authored by – CA Anushka Saraogi

TDS/TCS Provisions – Union Budget 2021

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TDS / TCS at Higher Rates for Non-filers of IT-Return

1. Section 206AB

Applicability:

  • This shall be effective from 1st July’21
  • 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
  • Aggregate TDS 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
  • Provision is not applicable to a non-resident who does not have a permanent PE in India

Rate:

TDS: Higher of the Following Rates-

  • Twice the rate specified in the relevant provision of the Act
  • Twice the rate or rates in force
  • 5%
  • Example: A contract payment of Rs. 60L each is made by DXO Co Ltd to Mr. Sunil for two consecutive years and on which tax under section 194C at the rate of 1% was deducted and remitted by DXO Co Ltd. However, Mr. Sunil has not filed his return of income for both the years. In such case, once these facts are ascertained in 3rd year, the payer must deduct tax at source at the higher rates given above. Had PAN not been furnished, TDS rate would be 20%.

2. Section 206CCA

Applicability:

  • This shall be effective 1st July’21
  • 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
  • Aggregate 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
  • Provision is not applicable to a non-resident who does not have a permanent PE in India

Rate:

TCS: Higher of the Following Rates-

    • Twice the rate specified in the relevant provision of the Act
    • 5%
Authored by – CA Anushka Saraogi

Compliances for March 2021

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TDS/TCS Provisions – Union Budget 2021

      3 Comments on TDS/TCS Provisions – Union Budget 2021

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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Difference between Late Payment & Late Deduction

The difference between late payment and late deduction:

Late payment: After the tax is deducted at source it has to be deposited into the government account by 7th of the next month (except March for which it is 30th April). If it is deposited later than the due date, late payment interest is charged. The rate of interest for late payment is 1.5% per month or part of a month of the delay.

Late deduction: If the tax is deducted later than the date on which it was deductible i.e. either at the time of giving credit or at the time of payment of the dues, whichever is earlier, late deduction interest is charged. The interest for late deduction is at the rate of 1% per month or part of a month of the delay.

Interest on Late Payment of TDS

TCS on sale of goods – Amendment from 1st October 2020

 

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