TDS on Purchase of Goods………Also, note the TDS/TCS implications on non-filing of Income tax returns…….
Whether TDS is applicable on purchase of Goods (section 194Q of Income tax Act)
(1) Who is required to deduct TDS under section 194Q of the Income Tax act and from whom?
A buyer whose sales turnover or Gross receipts in the Preceding Financial year is more than INR 10 Crores is required to deduct TDS under section 194Q.TDS deduction is to be made on his purchases from a resident seller in excess of INR 50 Lakhs in a financial year.
(2) What is the effective date of implementation of section 194Q?
Section 194Q is applicable effective 1st July 2021.
(3) When TDS deduction is to be made and at what rate?
TDS is to be deducted on the date of payment or credit, whichever is earlier. Rate of TDS is 0.10% when PAN of seller is available and it is 5% when PAN of seller is not available.
(4) What are the conditions for applicability of section 194Q
- Section 194Q is not applicable if TDS is deducted under any other sectionor TCS is collected under section 206C except section 206C(1H)
- On a particular transaction any one of the sections 194Q or 206C (1H) will apply i.e. both these sections will not apply simultaneously.
- In case of overlap between both these sections, section 194Q would be applicable and section 206C (1H) would not be applicable.
Whether TDS higher rate applicable for certain non-filers (specified person) of Income Tax Return (section 206AB & 206CCA of Income tax Act)
► New Section which are effective from 1st jul 2021
- Section 206AB and 206CCA are newly inserted sections in the Income Tax Act, 1961 vide Finance Act, 2021. These sections are special provision for deduction/collection of tax at source at a higher rate for certain non-filers (specified person) of Income Tax Return.
- Section 206AB deals with deduction of tax (TDS) at higher rate whereas Section 206CCA deals with collection of tax (TCS) at higher rate.
Higher of the following rates:
|
For Section 206AB |
For Section 206CCA |
|
(i) At twice the rates specified in the relevant provisions of the act |
(i) At twice the rates specified in the relevant provisions of the act |
|
(ii) At twice the rate or rates in force |
(ii) At the rate of 5% |
|
(iii) At the rate of 5% |
Who are ‘Specified Person’/ Conditions for Applicability of Section 206AB/206CCA
- Condition 1 – Person has not filed their Income Tax Return for two previous years immediately preceding the previous year in which tax is required to be deducted/collected
- Condition 2 – The time limit for filing of such return of income U/s 139(1) has expired.
- Condition 3 – Aggregate of Tax deducted/collected at source in each of these two financial years is INR 50,000/- or more.
How to Identify ‘Specified Person’ by Tax Dedicators/Collectors
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 a downloadable file which can be kept for record. The logic of how the functionality works has also been explained in detail in the said circular.
Additionally, Deductee/Collectee can give self-declaration to their respective tax deductor/collector about the non-applicability of Section 206AB/206CCA upon them.
