DID you KNOW? W.E.F. 1ST JULY, 2021:- STRINGENT PROVISIONS UNDER THE INCOME TAX ACT, 1961
DID
you KNOW?
W.E.F. 1ST JULY, 2021:- STRINGENT PROVISIONS UNDER
THE INCOME TAX ACT, 1961
The Finance Act, 2021 introduced following stringent
provisions under Income Tax Act, applicable from 1st of
July, 2021.
1.
TDS ON PURCHASE OF
GOODS [SECTION 194Q] (We can check out difference between corresponding section
206C(1H) - W.E.F 01st -Oct-2020)
2.
TDS FOR NON-FILERS OF
INCOME TAX RETURNS [SECTION 206AB]
(Refer already discussed, you may refer my
earlier article or you can provide your email ID in comment section, I will
provide you above section in detail understanding)
3.
TCS FOR NON-FILERS OF
INCOME TAX RETURNS [SECTION 206CCA]
(We will discuss later on)
Now, in
this article we can discuss only provision of section 194Q in details and
Comparatives between Section 194Q vs 206C (1H) along with practical examples.
TDS ON PURCHASE OF GOODS [SECTION 194Q]
Any
person, being a buyer who is
responsible for paying any sum to any resident
(hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value
exceeding fifty lakh rupees in any
previous year, shall, at the time of credit of such sum to the account of
the seller or at the time of payment
thereof by any mode, whichever is earlier, deduct
an amount equal to 0.1 per cent. of
such sum exceeding fifty lakh rupees
as income-tax.
Analysis above section
Explanation
of relevant terms used
a) buyer” means a person whose
total sales, 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 goods is carried out, not being a
person, as the Central Government may, by notification in the Official Gazette,
specify for this purpose, subject to such conditions as may be specified
therein.
b) “seller” means a person who is resident.
Analysis of above provision in Layman
Language
·
This provision shall be
applicable in the hands of Buyer of
goods.
·
The buyer has turnover exceeding Rs.10 crores during
the immediately preceding financial year.
·
Buyer has purchased Goods whether it may be Input / Capital Goods.
·
Buyer has purchased goods from a resident seller and his PAN is
available.
·
Aggregate Value of Purchase
from resident seller during the current
financial year exceeds Rs. 50 lakhs.
·
Above TDS is deducted @ the
time of credit or payment, whichever
is earlier.
·
TDS @ 0.1% (If no PAN of seller then TDS @ 5% as per
section 206AA)
·
While calculating above threshold limit of Rs 50 purchase
made form 1st of April,2021 will be counted but TDS to be deducted
on amount of purchase done after 1st of July,2021 only.
·
Above provision is not applicable in following cases
–
ü Transaction on
which TDS is applicable
under any other section of the
act (Example- 194C)
ü Transaction on which TCS is applicable under 206C act
Except 206(1H)
ü Turnover of buyer (Excluding GST) does not exceed Rs. 10 Crore in
preceding F.Y.
ü
When Seller is non-resident
ü Value of purchases of goods does not exceed Rs. 50 Lakh during current FY.
·
Where the buyer fails to deduct and deposit TDS,
purchase expenditure to the extent of
30% will be disallowed u/s
40a (ia) of the Income Tax Act, 1961 and shall be subject to income tax at applicable tax rate.
·
Conclusion
Check points for this section
ü
If your turnover in preceding
financial year exceeded Rs. 10 crores.
ü
Identify your sellers from whom
purchases has exceeded Rs. 50 lakhs during current FY.
ü
Obtain PAN from such sellers.
ü
Deduct TDS @ 0.1% at the time
of credit or payment on amount exceeding Rs. 50 lakhs.
DIFFERENCE BETWEEN SECTION 194Q AND SECTION 206C (1H)
Since both the sections relate to a single transaction but
difference between to compliance process pertains to TDS/TCS provision.
|
Section |
194Q |
206C (1H) |
|
W.E.F |
W.E.F 01-July-2021 |
W.E.F 01-Oct-2020 |
|
Purpose |
Tax to be deducted (TDS) |
Tax to be Collected (TCS) |
|
Which
Transactions? |
Only Purchase of Goods not
Services |
Only Sale of Goods not
Services |
|
Who is liable for
deduction/collection? |
Buyer/Purchaser is liable to deduct the tax |
Seller is liable to collect the tax |
|
Limit of Turnover |
Turnover of buyer
(Excluding GST) is Exceeding Rs.
10 Crore in preceding F.Y. |
Turnover of
seller (Excluding GST) is Exceeding Rs. 10 Crore in preceding F.Y. |
|
Counter Party |
Resident Seller |
Resident Buyer |
|
Threshold Limit
of Purchase/Sale |
If value of purchases of
goods exceeds Rs. 50 Lakh in a year |
If value of Sale of goods
exceeds Rs. 50 Lakh in a year |
|
Point of taxation |
At the time of Credit or Payment
whichever is Earlier |
At the time of receipt of sale
consideration |
|
Rate |
If Pan Available – 0.10% If Pan Not Available – 5% On amount exceeding Rs. 50 Lakhs |
If Pan Available – 0.10% If Pan Not Available – 1% On amount exceeding Rs. 50 Lakhs |
|
Due date of payment |
7th of next month
in which tax deducted (In case of March Month -30th April) |
7th of next month in which tax
collected |
|
Return Form |
Form 26Q |
Form 27EQ |
|
Not
applicable/Exclusion |
Transaction on which TDS is applicable under any other section of the act (Example- 194C) ·
·
Transaction on which TCS is applicable ·
under 206C act
Except 206(1H) |
·
Transaction on which buyer is Central or ·
State Govt, Local
Authority, Embassy or ·
Importer. ·
·
Transaction on which TDS/TCS is applicable ·
under any other
section of the act . ·
·
Therefore, If TDS
is deducted under Sec 194Q then TCS will not
collected under provision of 206(1H) |
|
Consequences of Non-Compliances |
·
Section 40a (ia)
disallowance of 30% is attracted on which Tax was liable to be deducted. ·
Example :- ·
·
If TDS was not
deducted on Rs. 50 Lakh (TDS=5,000) then you will have to do disallowed purchase of Rs. 15 Lakh. ·
·
Simple Interest @ 1% or 1.5% ·
·
( You can refer my earlier article on TDS ·
penality provision for details discussion along with
example) |
·
Simple Interest @ 1% |
Note: -
1) Whether above turnover includes only value
of goods or services or both:-
While calculating above turnover value of
goods and services both are to be
included.
2)
TDS to be deducted on Taxable
Value or Gross amount of Invoice which is including GST
Circular No. 17 dated 29-09-2020 has clarified to include GST on Goods
for collecting TCS under Section
206C(1H). However, no
such similar clarification has been received pertaining to TDS on Goods.
Hence, in absence of specific clarifications, it is advised to deduct TDS on Gross Invoice Amount including GST on
amount exceeding Rs. 50 lakhs.
3)
If provisions of Section 194Q and Section 206C (1H) ,
both are applicable, then which section shall prevail over?
Provisions of Section 194Q
shall prevail i.e., the buyer would deduct TDS u/s 194Q.
4)
Currently, provisions for lower
deduction of tax u/s 197 of the ITA, 1961 are not applicable.
PRACTICAL UNDERSTANDING OF SECTION 194Q AND SECTION 206C (1H)
|
Case |
Mr.A (Buyer’s) Turnover in Last Year |
Mr.B (Seller’s) Turnover in Last Year |
Value of Transaction in Current FY |
Section Applicable |
Person Liable |
Comments |
|
1 |
5 Cr |
8 Cr |
55 Lakhs |
Not Applicable |
– |
No TDS /TCS as both Buyer & Seller Turnover
< 10 CR |
|
2 |
2 Cr |
11 Cr |
65 Lakhs |
TCS u/s 206C (1H) |
Seller |
Mr B will collect TCS as Mr. B Turnover > 10 Cr &
value of Transaction > 50 Lakhs |
|
3 |
12 Cr |
5 Cr |
62 Lakhs |
TDS u/s 194Q |
Buyer |
Mr A will deduct TDS as Mr A Turnover > 10 Cr and
value of Transaction > 50 Lakhs |
|
4 |
11 Cr |
9 Cr |
70 Lakhs |
TDS u/s 194Q |
Buyer |
|
|
5 |
11 Cr |
11 Cr |
75 Lakhs |
TDS u/s 194Q |
– |
Mr. A will deduct TDS as Mr A Turnover > 10 Cr and
value of Transaction > 50 Lakhs (Important
to note that Provisions of Section 194Q shall prevail) |
|
6 |
15Cr |
20 Cr. (But Mr. B is Ecommerce operator) |
80 Lakhs |
TDS u/s 194O |
ECO |
TDS u/s 194Q/206C(1H) will not be applicable but
section 194O is applicable – where TDS will be deducted by E-commerce
operator from payment made to Mr.B |
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BIO of
Author:-
The author, CA Jayprakash Pandey is a practicing
Chartered Accountant (Founder of Jayprakash P & Company) having Office at
Mumbai, with more than 5 years of professional cum practical experience, Direct
Tax, International Taxation, Indirect Tax & FEMA related advisory,
litigation & compliance matters.
Disclaimer:
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purpose of this is to share knowledge and it is for education purpose only.
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