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Thoughts on Section 194Q and Section 206C(1H) of Income Tax Act, 1961

1. Mind-blowing Idea of these sections –

What was the need OF TDS/TCS u/s 194Q/206C(1H)? (If the purpose is to get Information to whom big sales are made then, we could have given the list PAN +Aadhar of such parties). Whosoever has brought the idea of 194Q and 206C(1H) i.e. TDS/ TCS on Goods PURCHASE/SALE, deserves Global Award for ‘World’s Most Innovative Taxation Compliance’. Bringing of section 194Q and 206C(1H) in the INCOME TAX act is a clear indication that FinMinIndia has totally messed up Taxation. What was needed? Is it to widen tax-base? To get penny sum of of 0.1% from each sale purchase transaction? why interested in Penny sum of 0. 1%?

Also Read: Technical difficulties involved in 194Q / 206C(1h) – ( i.e TCS on Sale of Goods vs. TDS on Purchase of goods ) 

2. Is it to Widen the Tax base by harassing honest?

When they couldn’t widened tax base in 60 yrs, pass on the burden to innocent, and the tax evaders are still out of net and hence the complaint taxpayers will have to pay the price of being honest and government will keep harassing them. They can’t bring new IT return filers who are liable but not filing return, They can’t bring new GST registrations who liable to register but did not registered, so better they keep increasing compliance to honest ones

3. Drafting mess-

Even if we make peace with these sections, why is collection & payment being used as a trigger point? Why can’t they draft these provisions keeping the Accrual system in mind ? Why can’t they just make things settle? It is horrifying situations while checking and making reconciliation each time.. Sale & Purchase amount would be easy to charge/deduct TDS /TCS.

4. Regarding fees & Labour involved –

The day is not far when TDS TCS Return filing Fee will be higher than Tax Audit (I’m not joking). 206C & 194Q are such Compliance where Amount involved is too small but the labour involved is too BIG. (Mainly ledger Scrutiny). Why did I say that TDS TCS fees will be higher than tax audit fees ? Because For these 194Q + 206C, The number of times one will have to check party accounts. Like every quarter end + Year end + ask ledger from the counter party. Also check 26AS. It feels like worth less exercise after some point.

They are giving importance to TDS TCS more than Tax Audit

If you see, Focus also has been in that directions

Increase in tax audit limit – mult-fold

Increase in TDS/TCS compliance multi-fold

5. Wrong precedence & misuse of Clarification. Is it More confusion in the name of clarification?

After clarification, These are like options given, there is dependency on what counter party do. In purchase, If he has done TCS, I will not do TDS. IF I will collect TCS, He will not deduct TDS. kya mazak bana rakha he. Dono me se koi ek karega to chalega ? Even If bare act provisions say differently.

Many BIG companies have been advised to continue to charge TCS even after 1st july, despite Buyer has given in writing that he will deduct TDS ( as Buyer>10cr). Just because BIG co. can’t bifurcate numerous buyers into 2 categories (less than 10cr & more than 10 cr). So they continue to charge TCS. after 1st july also. This is wrong practise happening

6. No one is Opposing

Why No one is Opposing these PROVISIONS? WHY NO SINGLE REPRESENTATIONS on this? At least no one is opposing the way they drafted this mess of confusing provisions?


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July 2024