Monetary Limit under section 194J & 194C are unchanged for Individual or HUF, it is still Rs 1 crore instead of Rs 5 crores

With Finance Act, 2020, tax audit total sales, turnover or gross receipts limit in case of Business has been changed to Rs 5 Crores instead of Rs 1 Crore earlier. Provided aggregate of all amounts received including amount received for sales, turnover or gross receipts during the previous year, in cash, does not exceed 5% of the said amount; and aggregate of all payments made including amount incurred for expenditure, in cash, during the previous year does not exceed 5% of the said payment.

Accordingly if business turnover of a person exceeds Rs 1 Crore but if it is less than 5 Crores, then Tax Audit will be not applicable, provided 5% cash transactions limit is not breached.

Now coming to TDS part, particularly section 194C & 194J, earlier an Individual or HUF were required to deduct TDS u/s 194C & 194J

  • if it is making payments regarding nature of transactions falling under these sections and amount exceeds monetary limit of Rs. 30k or Rs 1 lakh  mentioned in these sections as the case may be

AND

  • total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year.

However with Finance Act 2020, the words “the monetary limits specified under clause (a) or clause (b) of section 44AB” in the sections 194C & 194J the words “1 crore rupees in case of business or 50 lakh rupees in case of profession” have substituted. It means earlier these sections 194J & 194C were earlier linked to 44AB in case of Individual or HUF, however with Finance Act 2020, this linking has been broken and exact monetary limit of Rs 50 lakh & 1 crore have been mentioned.

Accordingly if a person who was not subject to tax audit since its total sales or turnover were more than 1 crore but were less than 5 crores during the year, he will be liable to deduct TDS u/s 194C & 194J in next financial year if amount exceeds monetary limit of Rs 30k or Rs 1 lakhs as mentioned in the section, since last year turnover were more than Rs 1 crore.

Similar amendment has been made in section 194H as well, stakeholders are advised to take a note of the same.

Please refer extract of section 194J, Old (Strikethrough) & New for detail:

1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of—

 (a) fees for professional services, or

 (b) fees for technical services, or

(ba) any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company, or

 (c) royalty, or

 (d) any sum referred to in clause (va) of section 28, shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax on income comprised therein :

Provided that no deduction shall be made under this section—

 (A) from any sums as aforesaid credited or paid before the 1st day of July, 1995; or

 (B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed—

(i) thirty thousand rupees, in the case of fees for professional services referred to in clause (a), or

(ii) thirty thousand rupees, in the case of fees for technical services referred to in clause (b), or

(iii) thirty thousand rupees, in the case of royalty referred to in clause (c), or

(iv) thirty thousand rupees, in the case of sum referred to in clause (d) :

Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB  exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such sum by way of fees for professional services or technical services is credited or paid, shall be liable to deduct income-tax under this section.

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