pri TDS u/s 194Q vis a vis TCS u/s 206C(1H); 206AB & 206CCA Demystifying provisions of TDS u/s 194Q vis a vis TCS u/s 206C(1H); 206AB & 206CCA

Demystifying provisions of TDS u/s 194Q vis a vis TCS u/s 206C(1H); 206AB & 206CCA

(Also refer CASE STUDY – TDS u/s 194Q vis-a-vis TCS u/s 206C(1H)- appended herewith)

Various obligations has been prescribed in Income Tax Act and Rules for deduction of tax at sources (TDS) as well as collection of Tax at source (TCS) under various Sections. To the said list of TDS/TCS obligations Section 206C(1H) was made effective from 1st October, 2020. Sections 194Q, 206AB and 206CCA has also been made effective from 1st July 2021. On 8th June 2021 CBDT has released a Notification amending the Income-tax Rules to be called the Income-tax (17th Amendment) Rules, 2021.

The Present population of India is estimated to be not less than 135 crores but the number of income-tax returns filed by individuals are comparatively too low. Further, there are wilful non-filers also even if their aggregate TDS/TCS is Rs 50000/- or more in a Financial Year. Therefore, to widen the tax base, the Government has also introduced w.e.f 1st July, 2021 Section 206AB and 206CCA for deduction of TDS/TCS at higher rates for the non-filers of Income-tax returns for two years immediately preceding the previous year.

The 11 pages CBDT Notification dated 8th June 2021 mainly specifies some of the additional disclosure requirement in TDS/TCS returns.

11 case studies are appended herewith to comprehend the Sections 194Q and 206C(1H).

NOTE-  if the TURNOVER of your Entity in the immediately preceding Financial Year (say check Turnover of FY 20-21 for applicability in FY 2021-22) is less than Rs 10 Crores – then obligation to deduct TDS u/s Section 194Q or Collect TCS u/s 206C(1H) are NOT applicable and vice-a-versa.

Applicable on Goods Only

 THUMB RULE

1. Turnover exceeds Rs 10 crore in previous year- 194Q & 206C(1H) applicable

2. 194Q and 206C(1H) are applicable on GOODS only

3. Provision of Section 194Q and 206C(1H) are mutually exclusive and

4. Normally Provisions of Section 194Q will prevail over the provisions of 206C(1H) in view of 2nd proviso to Section 206C(1H).

Salient features of 194Q (applicable wef 01.07.2021)-Deduction of tax at source on payment of certain sum for purchase of goods

APPLICABIILTY

  • With Effect from 01st July 2021
  • TDS u/s 194Q will be deducted by the BUYER @ 0.1%
  • on Purchase of GOODS from a person with aggregate value exceeding Rs 50 lakhs , in a Financial Year
  • from a SELLER who is RESIDENT IN INDIA as per provision of Income Tax Act

Who is liable to deduct TDS u/s 194Q

Buyer is liable to deduct TDS u/s 194Q – if

  • his Turnover/sales/gross receipts from business exceeds Rs 10 crores in immediately preceding financial year ; and
  • the aggregate value of Goods Purchased exceeds Rs 50 lakhs in the financial year

Extract from 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.

Rate of TDS u/s 194Q

The tax shall be deducted by the buyer of goods at the rate of 0.1% of the purchase value exceeding Rs. 50 lakhs if the seller has furnished his PAN, otherwise, the tax shall be deducted at the rate of 5%.

Applicable on aggregate purchase exceeding 50 lakhs in a financial year. TDS to be made on the amount which is in excess of Rs 50 Lakhs. (For the Financial year 2021-22, the quantum of purchases to be calculated wef 1.4.2021 for the purpose of arriving at figure of purchases of Rs 50 Lakh).

Example 1: Goods Purchased on 15th July 2021 for Rs 80 lakhs.  Payment made Rs 60 lakhs on 17th July 21.

TDS to be deducted u/s 194Q @0.1% on Rs 30 lakhs (i.e. 80-50)  i.e Rs 3000/-

Example2: Goods Purchased on 15th May 2021 for Rs 80 lakhs, payment made Rs 60 lakhs on 02nd July 2021: –

TDS u/s 194Q- NOT APPLICABLE since purchase before 01st July 2021. However, TCS u/s 206C(1H) will be applicable in case turnover of seller exceeds Rs 10 Cr in Fin YR 2020-21.

Refer – 11 case studies are appended herewith to comprehend the Sections 194Q and 206C(1H).

Other Notes on 194Q

1. PURCHASE of GOODS can be of Revenue Nature and/or Capital Goods.

2. If a person is falling within the definition of the buyer, tax is required to be deducted even if such purchase is not connected with the business carried on by him.

Explanation to 194Q(1) – For the purposes of this sub-section, “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.

3. Immovable property is not “goods”. Further TDS u/s 194IA is specifically present for deduction of TDS on value of Immovable property exceeding Rs 50 lakhs

4. Advance for payment of goods will also attract TDS U/s 194Q since the said section requires TDS obligation for “any sum for purchase of any goods” and not “any sum for goods purchased”.

5. Applicable 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. Even the amount is credited to suspense A/c or by any other name.

6. Deduction on PAN Basis – If the vendor has different units/branches/depotsin various parts of the Country, the amount paid or payable to all such units shall be aggregated to compute the limit of Rs.50 Lakhs on a PAN or Aadhar wise basis. i.e all the units /depot barnces under a single PAN/Aadhar to be clubbed togather to check applicability of the Rs 50 lakh threshold.

7. Lower deduction Certificates NOT ALLOWED: Since no amendment made in section 197/197A , as such, the seller does not have the option to approach the Assessing Officer to issue a certificate for a lower tax deduction or to file declaration for nil deduction in respect of transactions covered under section194Q.

8. TDS u/s 194Q is not applicable is not applicable on the following :

(a) On services purchased/ availed.

(b) If the total sales, gross receipts or turnover from the business does not exceed Rs 10 Crores in the immediately preceding financial year. (The term total sales, gross receipts or turnover has not been defined in the Section and as such we may consatrue the method what we adopt for Tax Audit Purpose. For calculating the threshold of Rs 10 crore, it will also include receipts on account of services). For the purpose of Calculating Turnover of Rs 10 crores, whether GST has to be included or not will depend on the method of accounting regularly employed by the entity.

(c) If seller is not resident in India

(d) If aggregate purchases of goods from a seller in Financial year does not exceed Rs 50 Lakhs

(e) On purchases of goods made upto 30th June 2021

(f) If TDS/TCS [except u/s 206C(1H)] on such transaction, under any other Section of Income-tax, is applicable.

(g) on any other person, (buyer) as may be notified subjected to the stated conditions.

9. Additional, allied, out of pocket expenses etc if reflected on the face of the invoice itself, it will form part of purchase value and will also be liable for TDS u/s 194Q. But if they are charged through a separate invoice and on actuals basis, it should not form part of purchase value for deduction of TDS and for computing the Rs. 50 Lakh threshold limit.

10. TDS u/s 194Q Applicable on canned software- The Supreme Court in its landmark decision of Tata Consultancy Services State of A.P [2004] 141 Taxman 132 (SC) held that Canned software (off the shelf computer software) are ‘goods’. Therefore, purchase of Canned software (off the shelf computer software) is purchase of ‘goods’ and will be liable to TDS under section 194Q even if buyer-entity capitalises the same in its books. Purchase of customisedor tailor-made software may be “services” and liable to TDS under section 194J or section 194-O.

11. It may be seen that an issue may arise as to applicability of TDS u/s 194Q or TCS u/s 206C(1H) on a transaction/payment/ receipt. Except in certain circumstances, on and from 1st July 2021, TDS u/s 194Q will prevail over TCS u/s 206(1H).

Provisions of section 194Q and the provisions of section 206C(1H) are mutually exclusive. i.e either of the one are applicable. In case TDS is deducted then TCS not applicable and vice-a versa.

12. Section 194Q will also be applicable for barter exchange of goods, also payment/adjustment in kind since payment can be in any mode.

13. In view of Supreme Court decision in Anarkali Sarabhai v. CIT [1997] 90 Taxman 509 (SC), Preference shares are movable property and goods and redemption of preference shares is clearly ‘sale’ by the shareholder to the company. Therefore, if redemption proceeds to any preference shareholder exceeds Rs. 50 Lakh limit, TDS under section 194Q would apply as it amounts to purchase of goods

14. In view of Supreme Court decision in Anarkali Sarabhai CIT [1997] 90 Taxman 509 (SC), buy back of shares by the company amounts to purchase of goods. However TDS u/s 194Q will not be applicable since it is already liable for TDS u/s 115QA.

TCS u/s 206C(1H)

Salient features of 206C(1H) (applicable wef 01.10.2020)

1. As per the provisions of the Act , TCS u/s 206C(1H) is not applicable on the following:

(a) On services rendered

(b) If the total sales, gross receipts or turnover from the business does not exceed Rs 10 Crores in the immediately preceding financial year. on Export of goods

(c) If TDS/TCS on such transaction, under any other Section of Income-tax, has already been made.

(d) On items mentioned in 206C(1)-Liquor for human consumption, Tendu leaves, Timber (obtained under Forest lease or otherwise), any other forest products (except Tendu leaves and timber); Scrap, minerals being coal/ lignite/ iron ore.

(e) On items mentioned in 206C(1F)- sale of motor vehicle exceeding Rs 10 Lakh in value

(f) On items mentioned in 206C(1G)- (a) being an authorised dealer, who receives an amount, for remittance out of India from a buyer, being a person remitting such amount out of India under the Liberalised Remittance Scheme of the Reserve Bank of India; (b)  being a seller of an overseas tour program package, who receives any amount from a buyer, being the person who purchases such package,

(g) If the buyer is liable to deduct tax at source under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount. (2nd proviso to 206C(1H)

(h) on the following buyer- (A) the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State or (B) a local authority or (C) any other person, as may be notified subjected to the stated conditions.

(i) transactions in securities and commodities which are traded through recognized stock exchanges or cleared and settled by the recognized clearing corporation, including recognized stock exchanges (Circular 17 dt 29.09.2020)

(j) transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges registered in accordance with Regulation 21 of the CERC

2. Applicable on sale of goods, not applicable on services.

3. Applicable on gross receipt basis irrespective of the period on such Bills were raised or period when goods sold. Applicable on advances received No adjustment on account of sale return or discount or indirect taxes including GST is required to be made for collection of tax under sub-section (1H) of section 206C of the Act since the collection is made with reference to receipt of amount of sale consideration.

4. Applicable on aggregate receipt exceeding 50 lakhs in a financial year. TCS to be made on the amount which is in excess of Rs 50 Lakhs.

5. If different units of the buyer are under the same PAN or Aadhaar number, the amount received from all such units shall be aggregated to compute the limit of Rs.50 Lakhs.

6. Section 206C(1H) does not allow the buyer to apply for the lower or nil TCS Certificate.

7. In case the sales or Turnover in immediately preceding previous year of the seller exceeds 10 crore, we should obtain declaration/ information from our customer, whether his turnover of buyer exceeds Rs 10 crore in the immediately preceding year-

(a) If the turnover of buyer does not exceed the said threshold limit of 10 crore, the seller will be under obligation to collect tax at source on receipts in excess of Rs 50 Lakh against sale of goods under Section 206C(1H).

(b) If the turnover of buyer exceeds the said threshold limit of 10 crore, normally the buyer will be under obligation to deduct tax at source u/s 194Q on purchases (once the aggregate purchase during the Financial Year exceeds of Rs 50 Lakh) made on or after 1st July 2021.

(c) If the turnover of buyer exceeds the said threshold limit of 10 crore, the seller will be under obligation to collect tax at source on receipts in excess of Rs 50 Lakh against sale of goods under Section 206C(1H)-

– Relating to purchases made by the buyer before 1st July 2021

– Relating to purchases made by the buyer on or after 1st July 2021, but the buyer has failed deducted TDS U/s 194Q.

– Relating to purchases made by the buyer on or after 1st July 2021, but the buyer has not deducted TDS U/s 194Q since his purchases during the financial year is yet to exceed Rs 50 Lakhs.

(For example, the buyer during the Financial year 2021-22 has made first purchases on 2nd July 21 of Rs 40 Lakh  and made full payment of Rs 40 Lakh to seller on 5th July 21. He again made a purchase of Rs 20 Lakh on 10th July 21 and made payment on 15th July Rs 19,99,000/- ( deducting Rs 1000/- being TDS U/s 194Q) No other transaction during July 2021. It may be noted that the said buyer had made purchase of Rs 70 lakh in March 2021 and the said payment of Rs 70 Lakh was made to the seller in May 21. Now while computing the TCS obligation U/s 206(1H) of the seller it works out to Rs 2000 for the month of May 21 and Rs 5000/- for the month of July 21. It will not be out of place to mention that neither the buyer nor the seller is a “specified person” within the meaning of sections 206AB or 206CCA of the Income-tax Act, 1961. )

Practical Approach

From point of view of Buyer whose Turnover exceeds Rs 10 Crores in immediately preceding previous year(check Turnover of FY 20-21 for applicability in FY 2021-22) – for TDS u/s 194Q

(a) Intimate the vendors that the buyer is liable to deduct TDS u/s 194Q and that the said TDS will be deducted on purchase made on or after wef 01st July 2021- in case the aggregate purchase by the buyer from the vendor in the said financial year exceeds Rs 50 lakhs

(b) Intimate the Vendor that in case they(i.e Vendors) were liable to Deduct TCS u/s 206C(1H) – that the Vendors DO NOT deduct TCS u/s 206C(1H) on  payments made to them in relation to them on or after 01st July 2021 for  purchase made/to be made on or after wef 01st July 2021 – sicne the Buyer will be deducting TDS u/s 194Q on the same

(c) Clarify to the Vendor that the Vendor will continue to be liable to deduct TCS u/s 206C(1H) for payments made upto 30th June 2021 or subsequent payments made to the vendor in relation to purchase made upto 30th June 2021 on which TDS was NOT deducted by the buyer u/s 194Q.

From point of view of Seller – whose Turnover exceeds Rs 10 Crores in immediately preceding previous year – for TCS u/s 206C(1H)

Seller should obtain declaration/ information from their customer, whether the customers’ turnover exceeds Rs 10 crore in the immediately preceding year (check Turnover of FY 20-21 for applicability in FY 2021-22)

(a) If the turnover of Customer does not exceed the said threshold limit of 10 crore, the seller will be under obligation to collect tax at source on receipts in excess of Rs 50 Lakh against sale of goods under Section 206C(1H).-

(b) If the turnover of Customer exceeds the said threshold limit of 10 crore, normally the buyer will be under obligation to deduct tax at source u/s 194Q on purchases (once the aggregate purchase during the Financial Year exceeds of Rs 50 Lakh) made on or after 1st July 2021.

(c) If the turnover of buyer exceeds the said threshold limit of 10 crore, the seller will be under obligation to collect tax at source on receipts in excess of Rs 50 Lakh against sale of goods under Section 206C(1H)-

– Relating to purchases made by the buyer before 1st July 2021

– Relating to purchases made by the buyer on or after 1st July 2021, but the buyer has failed deducted TDS U/s 194Q.

Salient features of 206AB (applicable wef 1.07.2021)- Special provision for deduction of tax at source for non-filers of income-tax return.

1. “Specified person” defined- both condition to be satisfied-

(a) A person (as defined in the Income tax Act) who has not filed the returns of income for both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be deducted, for which the time limit of filing return of income under sub-section (1) of section 139 has expired; and

(b) The aggregate of TDS and TCS in his case is Rs 50000/- or more in each of these two previous years.

Note: specified person shall not include a non-resident who does not have a permanent establishment in India.

2. Section 206AB Not applicable if TDS is deductible –

(a) U/s 192- Salary

(b) U/s 192A- Payment of premature accumulated (PF) balance due to an employee

(c) U/s 194B- Winnings from lottery or crossword puzzle

(d) U/s 194BB- Winning from horse race

(e) U/s 194LBC- Income against investment in the securitization trust.

(f) U/s 194N- Payments of certain amount/ amounts in cash

(g) If the seller is not a Specified person u/s 206AB

Note: Provision of section 206AB will be applicable to the nature of payments such as interest (194A), contract(194C), professional services(194J), rent (194I), etc. etc.

3. If TDS (other than under 5 specified sections) is required to be made on any payments made ( including payable or credited) to a specified person, the tax shall be deducted at higher of the following rates-

(a) at twice the rate specified in the relevant provision of the Act; or

(b) at twice the rate or rates in force; or

(c) at the rate of five per cent.

4. In case the specified person fails to furnish his PAN to the deductor (Section 206AA), and section 206AB is also applicable, the tax shall be deducted at higher of the two rates provided in section 206AB and in Section 206AA.

Salient features of 206CCA (applicable wef 1.07.2021)- Special provision for collection of tax at source for non-filers of income-tax return

1. “Specified person” defined- all the four elements /both condition to be satisfied-

(a) A person (as defined in the Income tax Act) who has not filed the returns of income for both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be collected at source, for which the time limit of filing return of income under sub-section (1) of section 139has expired; and

(b) The aggregate of TDS and TCS in his case is Rs 50,000/- or more in each of these two previous years.

Note: specified person shall not include a non-resident who does not have a permanent establishment in India.

2. Section 206CCA Not applicable–

– If the buyer is not a Specified person u/s 206CCA

3. If TCS is required to be made on any payments received from a specified person, the tax shall be collected at higher of the following rates-

(a) at twice the rate specified in the relevant provision of the Act; or

(b) at the rate of five per cent.

4. In case the specified person fails to furnish his PAN to the collector (Section 206CC), and section 206CCA is also applicable, the tax shall be deducted at higher of the two rates provided in section 206CC and in Section 206CCA.

COMMON QUERIES

Query 1- In case the turnover of Seller as well as Purchaser in the immediately preceding Previous year is more than 10 crores, whether provisions 194Q or 206C(1H) applicable ?

Ans: Normally Provisions of Section 194Q will prevail over the provisions of 206C(1H) in view of  2nd proviso to Section 206C(1H) which read as under:

Provided further that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount

However, it may be noted that the said second proviso is not blanket exemption from 206C(1H) but is coupled with a condition that the buyer has deducted such amount. In case the buyer has not deducted the amount (TDS), the seller should collect (TCS) on receipt of the relevant payment from the buyer.

Query 2- Whether TDS is to be deducted on the total invoice value including GST?

Ans: As per the clarifications from CBDT vide circular no. 23/17 dated 19 July 2017.The amount of GST levied as part of the invoice shall not considered for TDS. However, such clarification was issued in respect of GST on services only. As on date, No such clarification has been issued for GST on goods.

Further in  case of Section 206C(1H) , vide Circular no 17 dt 29.09.2020 CBDT has clarified that since TCS has to be made with reference to receipt of the amount of sale consideration, no adjustment on account of indirect taxes including GST is required to be made for the collection of tax under this provision (i.e 206C(1H))

In absences of any specific clarification by CBDT in term of Section 194Q and thereby borrowing the principle mentioned in Circular No 17 related to 206C(1H) – one may deduct TDS including GST component thereof , to avoid penal consequences and short deductions.

Query 3. What are the situations when the seller is liable to collect TCS on receipt rather than the buyer making TDS on purchases

Ans: The following could be situations where the Seller will be liable to collect TCS, subject to the receipt in the financial year exceed Rs 50 lakh:

(a) The payments received by the seller wef 1st October 2020 are related to the purchases made by the buyer before 1st July 2021.

(b) The payment received by seller on or after 1st October, 2020 relates to purchases on which the buyer was not liable to make TDS.

(c) The payment received by seller on or after 1st October, 2020 relates to purchases on which the buyer was liable to make TDS but has failed to deduct TDS..

(d) The payment received by seller on or after 1st July 2021 relates to purchases made on or after 1st July 2021 on which the buyer was not liable to make TDS since his purchases for the financial year has not yet exceeded Rs 50 Lakhs.(This is evident from the Second proviso of 206C(1H))

Query 4: Whether application can be made for Nil or lower TDS/ TCS?

Ans: No there is no provision for applying for NIL or lower rate of TDS/TCS for Sections 194Q/ 206C(1H)/ 206AB/ 206CCA.

Query 5: Deduction for separate units or to be seen in aggregate on PAN basis?

Answer: Deduction on PAN Basis – Even if the vendor has different units/branches/depots in various parts of the Country, the amount paid or payable to all such units shall be aggregated to compute the limit of Rs.50 Lakhs on a PAN or Aadhar wise basis. i.e all the units /depot branches under a single PAN/Aadhar to be clubbed together to check applicability of the Rs 50 lakh threshold.

Query 6: X purchased Goods from ABC Ltd of New York whose value was approx. Rs 1Crore INR, whether TDS u/s 194Q will be deducted by X ?

AnsSince ABC Ltd(‘the seller’) is NON RESIDENT in terms of Income Tax Act, as such provision of Section 194Q are NOT applicable

Extract from 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.

Query 7:Whether for the purpose of Calculating Turnover of 10 crores, whether GST has to be included?

Ans: The terms  “total sales”, “gross receipts” or “turnover” has not been defined in these Sections or in Income Tax Act and as such we may apply what we adopt for Tax Audit Purpose to arrive at the  meaning of such terms. For calculating 10 crore, it will also include receipts on account of services. For the purpose of Calculating Turnover of 10 crores, whether GST has to be included or not will depend on the method of accounting regularly employed by the entity.

However, there may be situations where before adding the GST component, the turnover etc are below the threshold of Rs 10 Crore (say Rs9.60 Crore) but after adding the GST Component it exceeds Rs 10 crores. Without prejudice to what has been said above, the practical approach would be to deduct tax U/s 194Q keeping in view the 30% disallowance of purchases u/s 40(a)(ia) and also Penalty of rigorous imprisonment of minimum three months to maximum seven year imprisonment and fine u/s 276B

Query 8: How to determine,which two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be deducted/ collected, for which the time limit of filing return of income under sub-section (1) of section 139 has expired for the purpose of ascertaining ‘Specified persons’ u/s 206AB and/ or 206CCA?

Ans: As on the date of deduction / collection of TDS/ TCS, as the case may be, the deductor/ collector should ascertain two consecutive years for which Asst Year the due date for filing of the deductee/collectee u/s 139(1) has already expired on that date. For example, if the date of deduction/ TCS is on 15st October 21, the two Financial Years to be checked

– For individual deductee FY 2019-20 and 2020-21 (since due date for FY 2020-21 being 30.9.2021)

– For Company deductee FY 2018-19 and 2019-20 (since due date for FY 20-21 being 31.10.2021)

Similarly, if the date of deduction/TCS is on 10st July 21, the two Financial Years to be checked

– For individual deductee FY 2018-19 and 2019-20 (since due date for FY 2020-21 being 30.9.2021)

– For Company deductee FY 2018-19 and 2019-20 (since due date for FY 20-21 being 31.10.2021)

Query 9: To be considered as “Specified person” u/s 206AB and /or 206CCA whether all the four elements of both the conditions are to be satisfied?

Ans: YES all the four elements [failure to file IT return for both years within due dates u/s 139(1) and the aggregate amount of TDS+TCS for both the years need to be not less than Rs. 50000/-] are to be fulfilled to be considered as “specified person”.

Query 10: Have a confusion. In 206AB there’s a trigger point of 50000 TDS /TCS per year. Is this the total TDS reported by the specified person for all deductor. Or it is only if the TDS exceeds Rs 50k for a specific deductor. Generally it is specific to a person deducting tax. Since the language is “and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in each of these two previous years”:

Here “his” is the TDS deducted on transactions with the specified person by the buyer i.e Qua deductor vis a vis deductee. Otherwise it is impossible for the deductor to apply this section.

Ans: The amount of Rs 50000/- (TDS+TCS) is to be considered from one or more deductor/ collector per year. It is expected that on the lines of Section 194N, the portal will provide facility to check PAN wise the Return filing status as well as whether the aggregate of TDS+TCS for the related years are 50000 or more. The deductor/ collector can obtain information from the concerned person also. The concerned person is under obligation u/s 206AA/206CC to provide his PAN to the deductor/ collector. Failure to provide PAN will attract higher rate of TDS/TCS.

Note-Refer the attached 11 Case Studies for more clarity on the above

Author Bio

More Under Income Tax

8 Comments

  1. Aditya says:

    Sir, Kindly clarify the following:
    A Unit satisfies the criteria of 10 Cr turnover and makes its purchase under Section 206C(1A)-TCS. The same goods are sold to various units with 10Cr turnover or more.
    In such circumstances kindly explain the applicability of Section 194Q-TDS on sale of goods for the Unit.

    1. madanlalassociates says:

      I think you have misquoted Section 206C(1A). Whether your purchases have undergone TCS U/s 206C(1) or you are referring to declaration furnished by you u/s 206C(1A) on such purchases. I think you have made purchases out of the seven category of items mentioned in Section 206C(1) and that your purchases have suffered TCS u/s 206C(1).
      I hope, you want to know the applicablity to you of Section 194Q when such goods are sold to others whoes turnover in the last financial years were also more than 10 crore.

      If that be so,
      please note that at the time of selling, section 194Q (being applicable on purchase) is not applicable on you. Rather the product sold by you being items mention in Section 206C(1), you need to collect tax at source (TCS) u/s 206C(1) irrespective of Turnover of your customer (buyer).
      Hope, this serves your query. In case your query is otherwise, please write specifically.

    2. madanlalassociates says:

      Further, while purchasing by you such goods mentioned in Section 206C(1), Section 194Q will not be applicable to you due to the following specific madate of sub section (5) of Section 194Q :
      “(5) The provisions of this section shall not apply to a transaction on which—
      (a) tax is deductible under any of the provisions of this Act; and
      (b) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies.”

      In your case, at the time of purchase by you, tax was collectible u/s 206C(1).

  2. Naresh Kotte says:

    Case studies and common queries illustrated by the author admirably to understand provision in board. 11 case studies designed superb to cover all practical complexities.

    Thanks a lot for the effort.

  3. madanlalassociates says:

    We are sorry for some typing errors in the case study sheet.
    In case study 2, Payment to Y for May 21 should be read as “70 Lakhs” instead of 70
    in case study 10, the total of Payment to Y may be read as 24 Lakhs instead of 44 lakhs.
    We are extreamly sorry for the inconvenience caused.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

July 2021
M T W T F S S
 1234
567891011
12131415161718
19202122232425
262728293031