Section 194Q – TDS on PAYMENT for PURCHASE of GOODS (w.e.f. 01.07.2021)
1. Applicable on BUYER i.e. person making payment
2. On GOODS purchased – not on services
3. SELLER is RESIDENT i.e. not applicable to Non-Resident (not having any permanent establishment in India).
4. BUYER has TURNOVER from business EXCEEDING Rs.10 CRORES in the preceeding financial year.
5. PAYMENT to supplier / credit to account of supplier, whichever is earlier, during the financial year EXCEEDS Rs.50 LAKHS.
6. TDS @ 0.10 % of PAYMENT / credit over Rs.50 LAKHS INCLUDING GST.( Advisable to include GST component)
7. IF PAN NOT PROVIDED but has filed RETURNS in the last preceding two previous years: HIGHER of – applicable rate or 5% [2nd Proviso to Section 206AA(1)]
8. If PAN NOT PROVIDED and ALSO NOT FILED RETURNS for the preceding two previous years within time limit prescribed u / s 139(1) and total of TDS and TCS in each of two preceding previous years is Rs. 50,000/- or more : Higher of – 5% or 5%, i.e., 5% [Section 206AB(2) read with 2nd Proviso to Section 206AA(1)]
9. Provisions of this section shall not apply where tax is deductible under any provisions of the Act and tax is collectible under section 206C, other than transactions where Section 206C (IH) applies; Section 194Q(5) – Where section 194Q applies, section 206C(1H) shall not apply.
Section 206AA – TDS ON PAYMENTS to Non – providers of PAN (w.e.f. 1.4.2010)
1) HIGHER of – specified rateor 20%
2) However, for Section 194O and 194Q, it shall be read as –
HIGHER of – applicable rate or 5%
(Second Proviso to Section 206AA regarding Section 194 Q inserted w.e.f. 01.7.2021 by Finance Act, 2021)
[This section starts with Non-obstante clause and accordingly has overriding effect over other provisions of the Act.]
Section 206AB – TDS on Non – filers of Returns (w.e.f. 01.07.2021)
[A person who has Not filed Income Tax returns of immediately preceding TWO financial years within time limit prescribed u/s 139(1) and aggregate of TDS deducted and TCS collected in his case is Rs.50,000 or more in each of the two preceding years]
1) PAN available – HIGHER of – Twice the specified rate or 5% ; Section 206AB(1);
2) PAN not available – HIGHER of – specified rate / 5% as per section 206AB (1); or 20% as per Section 206AA, except for Section 194Q @ 5% [since 2nd Proviso to Section 206AA(1) applies which states rateof 5%.]
3) This section starts with Non – obstante clause and accordingly has overriding effect over other provisions of the Act. ]
4) Please see Note 2 below
Section 206CC – TCS for failure to provide PAN BY PERSON MAKING PAYMENT ( w.e.f. 1.4.2017 )
1) HIGHER of – Twicethe specified rate or 5% ; Section 206CC(1)
[e.g. under Liberalized Remittance Scheme (LRS), remittance exceeding Rs. 7 lakhs in a financial year or Overseas Tour Package, TCS rate is 5%, therefore if PAN is not provided then, TCS to be collected will be HIGHER OF – (a) Twice of specified TCS Rate of 5% and (b) 5%, i.e. 10%.]
2) For Section 206C(1H) (TCS to be collected by Seller of goods from Buyer) : HIGHER of – Twicethe specified rate ( twice of 0.10% i.e. 0.20% ) or 1% ( First Proviso to Section 206C (IH ) read with Section 206CC(1); ( Providing Aadhar Number is optional for Buyer ).
3) This section starts with Non-obstante clause and accordingly has overriding effect over other provisions of the Act.
Section 206CCA – TCS of Non filers of Returns ( w.e.f. 1.7.2021)
(A person who has Not filed returns of immediately preceding TWO financial years and aggregate of TDS deducted and TCS collected in his case is Rs.50,000 or more in each of the two preceding years) –
1. HIGHER of – Twicethe specified rate or 5%
2. If PAN not provided to the person collecting tax, then HIGHER of rate Provided in Section 206CC(1) (higher of twice the rate specified/ 5%) OR Twice the rate specified / 5% [section 206CCA (1) and section 206CCA(2)].
3. This section starts with Non-obstante clause and accordingly has overriding effect over other provisions of the Act.
Section 206C (1H) – TCS on RECEIPT of SALE CONSIDERATION on Sale of GOODS from BUYER (w.e.f 01.10.2020)
1. Applicable on SELLER i.e. person receiving payment of sales consideration
2. On GOODS sold – not on services
3. BUYER is RESIDENT i.e. not applicable to EXPORT OF GOODS.
4. SELLER has TURNOVER from the business EXCEEDING Rs.10 CRORES in the preceding financial year.
5. RECEIPTS during the financial year EXCEEDS Rs.50 LAKHS.
6. TCS @ 0.10% on RECEIPTS EXCEEDING Rs.50 LAKHS INCLUDING GST.
7. IF PAN or AADHARNOT PROVIDED by BUYER but FILED INCOME TAX RETURNS in the past – HIGHER of – Twice the specified rate (Twice of 0.10 %, i.e. 0.20%) or 1% [1st Proviso to Section 206C(1H) read with Section 206CC(1)(ii)]
8. If PAN or AADHARNOT PROVIDED by buyer and also NOT FILED INCOME TAX RETURNS then (1) UNDER SECTION 206C(IH) : Higher of –
(I) Twice of Rate specified (Twice of 0.10%) and 1 % – as per First Proviso to Section 206C(IH ) read with section 206CC(1)(ii)];
(II) Higher of – Twice the rate specified (Twice of 0.10%) or 5%)] – u/s 206CCA(2)
i.e. higher rate is 5% under first proviso to section 206C(IH) read with Section 206CC (1)(ii) and Section 206CCA(2) for non-filers who are not submitting PAN [or Aadhar u/s 206C(IH)].
1. Where the buyer fails to deduct and deposit TDS, purchase expenditure (on which TDS is not deducted and deposited) to the extent of 30% will be disallowed u/s 40(a)(ia) of the Act ;
2. Section 206AB is applicable to all the TDS sections like Section 194 (Dividends), 194A (Interest), 194C (Payments to contractors/ subcontractors), 194H (Commission), 194-I (Rent), 194 J (Professional fees), 194IA (Purchase/ Sales consideration of Immovable Property), etc., except Sections192, 192A, 194B, 194BB, 194LBC and 194N.
3. CBDT has vide its Circular No. 11/2021 dated 21.6.2021 (F. No. 3701331712021-TPL) clarified that for the purposes of Section 206AB and Section 206CCA, LIST AS AT THE BEGINNING of financial year 2021-22 needs to be checked from Income Tax Portal (“Compliance Check for Sections 206AB & 206CCA”) as regards ‘specified persons’ to which no new name shall be inserted in financial year 2021-22; Only deletion of names of assesses who have filed Income Tax Returns (including Belated and revised TCS & TDS returns) shall be done.
4. Draft letter to be sent to assessees’ customers/suppliers for compliance of above Sections asking for various details is given herein below.
5. Since new sections inserted w.e.f. 01.07.2021 have non-obstante clause in the beginning, they have overriding effect over other provisions of the Act.
6. There are numerous areas where there is ambiguity as regards TDS / TCS rates. To avoid litigation of assesses with the department, it shall be better if CBDT issues a circular explaining the provisions of the above sections.
7. CBDT vide its Press Release dated 22nd June 2021 has issued a clarification for the use of functionality under section 206AB and 206CCA of the Income-Tax Act, 1961. This functionality is already functioning through reporting portal of the Income-tax Department (https://report.insight.gov.in) .
I, ________________________________ being Director/Partner/Proprietor/Authorised signatory of M/s ___________________ (name of the entity) (hereinafter referred to as “the entity”) having its registered office at ___________________________________ and having PAN Number of Income Tax as (Photocopy of PAN Card enclosed) on behalf of the said entity do hereby make the following declaration:
|S. No.||Particulars||Please tick (As applicable)|
|1.||The total sales/gross receipts/turnover of the above entity exceeded Rs. 10 Crores (Rupees Ten Crores) (inclusive of GST) during Financial Year 2020 -21.|
|2.||The total sales/gross receipts/turnover of the above entity was equal to or less than Rs.10 Crores during the Financial Year 2020 – 21.|
|3.||Since we fall in category specified in S. No. 1 above and are buying goods from your company and the aggregate value of such goods has already exceeded Rs.50 Lakhs/shall exceed Rs. 50 Lakhs till 30th June 2021, w.e.f. 1st July 2021 we shall be deducting TDS @ 0.10% of purchases value/payments (including advances) made to you exceeding Rs.50 Lakhs. We shall be issuing you requisite TDS Certificate(s) on monthly/Quaterly basis as required under provisions of the Income Tax Act, 1961.|
|4.||Since our total sales/gross receipts/ turnover (including GST) of the above entity was less than Rs.10 Crores during the financial year 2020-21, we are not required to deduct TDS under section 194Q of Income Tax Act, 1961. As you have informed us that since your turnover during the financial year 2020 – 21 has exceeded Rs.10 Crores, you may collect TCS (Tax Collected at Source) @ 0.10% of payments made by us against your sales to our entity exceeding Rs.50 Lakhs as per Section 206C(1H) of Income Tax Act, 1961.|
|5.||As desired by you we are giving herein below details of Income Tax Returns filed by us for the above entity for the last 2 (Two) Assessment Years.|
Declaration of Filing Income Tax Returns:
|S. No.||Financial Year||Assessment Year||Whether ITR Filed
|ITR Acknowledgement Number (if ITR filed)||Date of Filing|
|1.||2018 – 19||2019 – 20|
|2.||2019 – 20||2020 – 21|
(Please note that it is mandatory to give the above details of Income Tax returns filed since otherwise higher rates of TDS/TCS shall be applicable in view of provisions of Sections 206AB/206CCA inserted w.e.f. 01.07.2021 by Finance Act, 2021; the above declaration is applicable to entities whose aggregate of TDS and TCS was Rs. 50,000 or more during each of the above Two Financial Years )
I hereby confirm that the above details in respect of total sales/gross receipts/turnover of the entity’s business and its Income Tax Returns filed are true and correct. If any of the above statement is found to be incorrect and untrue, I/we shall be liable to indemnify M/s _______________________________________________ having its work office at ___________________________________ for any demand/penalty/interest as may be levied on you by Income Tax Authorities for any non-compliance/ wrong compliance on your part due to incorrect/untrue information given by us to you.
Declaration to be furnished on Company/Firm/Proprietor’s Letterhead duly signed and stamped as above.
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