TDS and TCS Latest amendment.pptx

TDS and TCS Latest Amendment and Key Points
9/30/2022
Astral Business Consulting LLP - Saturday Training

Key Points on TDS Provisions:
Sec 192: TDS on salary as per Normal Slab rate
TDS will be applicable to salary employee even employer being Non resident residing outside India.
Sec 194: TDS on Dividend
Any Dividend more than Rs.5000 will attract TDS for Individual for others no limit- 10%
Sec 194A: TDS on Interest
Interest on late payment also will attract TDS
Savings Account interest will not be covered under TDS
Sec 194J: TDS on Director’s Fees
Any payment to director who is not covered under 192 will attract TDS under this Section (Independent Director) - No
Limit even Rs.5000 will attract TDS
Sec 195: TDS on Income of Investment made by NRI
Any payment to Non resident when income is taxable in India (received/ accrued/not accrued)
Sec 194O: TDS on payment made to E-Commerce Participant:
E-Commerce operator (Amazon / Flipkart) should deduct TDS at 1% on gross amount of sale of goods / service by E-
Commerce Participant (Local Seller) through digital platform
Threshold limit: E-commerce operator is not required to deduct TDS if the gross amount of sale of goods,
services, or both during the previous year does not exceed Rs 5 lakh and if the e-Commerce participant has
furnished his PAN or Aadhaar.
If the e-Commerce participant does not furnish his PAN or Aadhaar, TDS must be deducted at the rate of 5%,
as per provisions of Section 206AA
Continuation…
9/30/2022

Sec 194N: TDS on cash withdrawal from Bank / Post Office
TDS on cash withdrawal from Bank / Post Office (both resident and Non resident) - Threshold limit 1 Crore
Sec 40(a)(i): Disallowance of expenditure made to Non resident without deducting TDS
Disallowance of expenditure: As per section 40(a)(i) of the Income-tax Act, any sum (other than salary) payable outside India or to
a non-resident, which is chargeable to tax in India in the hands of the recipient, shall not be allowed to be deducted if it is paid
without deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of
return.
However, if tax is deducted or deposited in the subsequent year, as the case may be, the expenditure shall be allowed as deduction
in that year
Sec 40(a)(ia): Disallowance of expenditure made to resident without deducting TDS
Any sum payable to a resident, which is subject to deduction of tax at source, would attract 30% disallowance if it is paid without
deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of return.
However, where in respect of any such sum, tax is deducted or deposited in subsequent year, as the case may be, the expenditure
so disallowed shall be allowed as deduction in that year.
Note: TDS should be deducted on or before 31st March otherwise it will be disallowed as expenses in the current FY
Sec 194C: TDS on Contract
Specified person has undertaken to supply all or any of the materials necessary for the work at the stipulated
prices, the deduction will be related to the gross payment without excluding any adjustments on account of the cost of
materials.
The ownership of the materials supplied remaining at all times with specified person, the sum payable to the
contractor in respect of the contract will only be the amount paid for such labour or services and will, thus, not
include the price of the materials supplied by the specified persons.
9/30/2022

Finance Act 2021 has introduced Section 194Q providing TDS on
purchase of goods applicable w.e.f from 1st July, 2021. Section
194Q is similar to Section 206C(1H) which was introduced by
Finance Act 2020, requiring Seller to collect tax at source on
transactions between a buyer and a seller.
9/30/2022

Comparative analysis
Particulars Section 194Q (TDS) Section 206C(1H) (TCS)
Effective Date 1st July, 2021 1st October, 2020
Person responsible Buyer Seller
Applicability/ Turnover Limit Turnover of Buyer > Rs 10 Cr in
preceding Financial Year
Turnover of Seller > Rs 10 Cr in
preceding Financial Year
Counter Party Resident Seller Resident Buyer
TDS/TCS Rates 0.1% on amount of Purchase of goods
exceeding Rs. 50 Lakhs.
5% (If PAN not available)
0.1% on amount of Sale consideration
received exceeding Rs. 50 Lakhs.
1% (If PAN not available)
Threshold Limit Threshold Limit of Rs. 50 lakhs shall be
computed from 01-04-2021
Threshold of Rs. 50 lakhs shall be
computed from 01-04-2020.
Point of Taxation Payment or Credit whichever is earlier At the time of receipt
TDS/TCS on Advance
Payment/Receipts
Yes Yes
9/30/2022

Clarification – TDS on Purchase of Goods 194Q
TDS on GST or Not:
 Accordingly with respect to TDS under section 194Q of the Act, it is clarified that when tax is deducted at
the time of credit of amount in the account of seller and in terms of the agreement or contract between the
buyer and the seller, the component of GST comprised in the amount payable to the seller is
indicated separately, tax shall be deducted under section 194Q of the Act on the amount credited
without including such GST. However, if the tax is deducted on payment basis because the payment
is earlier than the credit, the tax would be deducted on the whole amount as it is not possible to
identity that payment with GST component of the amount to be invoiced in future
No Adjustment against Purchase return:
 No adjustment is required if the purchase return is replaced by the goods by the seller as in that case the
purchase on which tax was deducted under section 194Q of the Act has been completed with goods replaced
Seller income is expemted
 The provisions of section 194Q of the Act shall not apply on purchase of goods from a person, being a
seller, who as a person is exempt from income tax under the Act (like person exempt under section 10)
or under any other Act passed by the Parliament (Like RBI Act, ADB Act etc.).
 The above clarifications would not apply if only part of the income of the person (being a seller or
being a buyer, as the case may be) is exempt.
Continuation…
9/30/2022

Clarification – TCS on Sale of Goods 206C(1H)
Turnover
 In case of computing the turnover of the seller, whether it should be inclusive of GST or not, the CBDT
Circular did not clarify it but by virtue of the specific provisions of section 145A, in computing the total
sales/turnover/gross receipts, the amount of GST shall be included & Export Turnover is excluded
Receipt of Consideration from buyer- including or excluding GST
 The receipt of sale consideration from a buyer towards sale of goods shall include the GST amount also.
This has been clarified by the CBDT in the guidelines issued by Circular No. 17/2020.
 For example, If the buyer pays Rs. 55 Lakhs inclusive of GST of Rs. 10 Lakhs, then even though the basic
amount of consideration for the sale of goods is less than Rs. 50 Lakh (Rs. 45 lakhs in this case), TCS shall
apply since after including GST, total consideration exceeds Rs. 50 Lakhs
Adjustment for sale return, discount or indirect taxes
 CBDT guidelines issued by Circular No. 17/2020 states that 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.
Running balance account customer:
 TCS provision shall be applicable on the amount of all sale consideration received on or after 1st
October, 2020 without making any adjustment for the amount received in respect of sales made before 1st
October, 2020
Continuation…
9/30/2022

Buyer has expemt income
 The provisions of this sub-section shall not apply to sale of goods to a person, being a buyer, who as a person is exempt from
income tax under the Act (like person exempt under section 10) or under any other Act passed by the Parliament (Like RBI
Act, ADB Act etc.).
 The above clarifications would not apply if only part of the income of the person (being a seller or being a buyer, as
the case may be) is exempt.
How the buyer will know whether the seller is liable for TCS
 There is no way to determine whether the seller’s turnover in the previous year is more than Rs. 10 crore or not. In case of
companies one may get the annual reports from the public domain but for other persons one has to depend on the seller’s
action.
 However, the buyer can check whether he has paid consideration for sale of goods for more than Rs. 50 Lakh or not. In case,
such consideration does not exceed Rs. 50 Lakh in a year, there is no obligation to pay the TCS to the seller
TCS on both sale and purchase transaction between the buyer and the seller
 In certain cases, the seller may have purchase transactions with the byer. For example, Mr A. is a seller who sells the goods
to Mr. B. In turn Mr A. also purchases from Mr. B. Suppose in FY 2020-21, Mr A has sold goods with Rs. 70 Lakh to Mr B and
bought Rs. 40 Lakh worth of goods from Mr. B. Mr. B has paid net of Rs. 30 Lakh to Mr A in FY 2020-21.
Now in this case the actual consideration received is less than Rs. 50 Lakh which is Rs. 30 Lakh only. However, please note
that the term ‘consideration’ used in section 206C(1H) does not refer to money only. Adjustment of receivables with
book entry also amounts to payment of consideration. In this case the consideration is paid in ‘kinds’. Hence, in my
opinion, TCS shall be collected on Rs. 20 Lakh (Rs. 70 Lakh - Rs. 50 Lakh) by Mr A.
However, a contrary view is also possible in this case. Hence, till a clarification is issued by the CBDT, one should
collect TCS on consideration adjusted through journal entry in the books.
Continuation…
9/30/2022

Not Applicable Transactions
TCS Not applicable on the Following Transactions:
 Inter – branch transfer of Goods
 Job work or Works Contracts
 Sale of Lands, Buildings & Flats
 Export of Goods out of India
 Leasehold rights and Transfer of Development Rights
 If the sale of goods and installation charges are independent activity, then the provisions of section 206C(1H)
shall apply only on the sale of goods. The receipt from installation charges will amount to sale of services
 Debts Written off
Continuation…
9/30/2022

Receipt of Consideration from the buyer towards sale of goods or sale of services or both
 In case a buyer pays the seller both for services and sale of goods, only the consideration paid towards the sale of
goods shall be liable for TCS if it exceeds Rs. 50 Lakhs.
 For example, a buyer pays for the followings to his seller during FY 2020-21 –
 In this case, the buyer is not liable to pay TCS to the seller since the consideration paid to the seller does not exceed Rs. 50
Lakhs even total consideration exceeds Rs. 50 Lakh. This is because the consideration paid other than towards sale of goods
are out of the scope of TCS provisions
 In an another example, a buyer pays for the followings to his seller during FY 2020-21 –
 In this case, the buyer is liable to pay TCS to the seller since the consideration paid to the seller towards the sale of goods
exceeds Rs. 50 Lakh. However, the buyer should pay TCS only on Rs. 10 Lakh (Rs. 60 Lakh - Rs. 50 Lakh) which is paid as
consideration towards the sale of goods, since any consideration paid other than towards the sale of goods are out of the
scope of TCS provisions.
Consideration paid for Sale of Goods Rs. 45 Lakh
Consideration paid for Services Rs. 15 Lakh
Total Consideration paid to the Seller Rs. 60 Lakh
Consideration paid for Sale of Goods Rs. 60 Lakh
Consideration paid for Services Rs. 15 Lakh
Total Consideration paid to the Seller Rs. 75 Lakh
9/30/2022

Continuation…
9/30/2022
Illustration
Turnover
during FY
19-20
Sales till
30.09. 2020 to
“M/s ABC”
Sales from
01.10. 2020
to “M/s ABC”
Collection till
30.09. 2020 from
M/s ABC
Collection on or
after 01.10. 2020
from M/s ABC
TCS u/s
206C(1H) @
0.075%
Remarks
6 Cr 11 Cr 7 Cr 10 Cr 8 Cr Nil No TCS shall be collected due to
there as on that the Turnover of
the assessee was less than 10Cr in
FY 2019-20
15Cr 25 lakhs 65 lakhs 20 Lakhs 60 lakhs 2250 TCS applicable on (20+60-50) Rs
30lakhs @0.075%
12 Cr 65 lakhs 85 lakhs 75 lakhs 40 Lakhs 3000 Thre shold limit of Rs 50lakh shas
been consumed till 30.09.2020
hence TCS would be applicable on
all receipts on or after 01.10.2020
i:e Rs 40lakhs
20 Cr 85 lakhs 60 lakhs Nil 1.25 Cr 5625 TCS applicable on (1.25cr-50lakhs)
Rs75lakhs.

Continuation…
9/30/2022
Illustration
Seller Turn-
over (In
Crore)
Buyer
Turn-over
(In Crore)
Receipt or
Payment
for sale or
purchase of
Goods in
previous
year (In
Lakhs)
Amt. on
which tax
will be
calcul-ated
Seller PAN Buyer PAN TDS TCS
Liable
Person
Section
under IT
Act
Exclusion
Section
Reason
9 12 54 4 Available N/A Yes @0.1% N/A Buyer 194Q
Out of scope of
Sec 206C (1H)
Seller Turnover less
than 10 Cr.
14 8 57 7 N/A Available N/A Yes @0.1% Seller 206C(1H)
Out of scope of
Sec 194Q
Buyer Turnover
less than 10 Cr.
13 14 62 12 Available Available Yes @0.1% N/A Buyer 194Q
Out of scope of
Sec 206C (1H)
Exclusion
Provided under
Sec 206C(1H)
9 12 54 4
Not
Available
N/A Yes @5% N/A Buyer 194Q/ 206AA
Out of scope of
Sec 206C (1H)
Seller Turnover less
than 10 Cr.
14 8 57 7 N/A
Not
Available
N/A Yes @1% Seller
206C(1H) /
206AA
Out of scope of
Sec 194Q
Buyer Turnover
less than 10

9/30/2022

New Section 206AB (TDS) and 206CCA (TCS)
Finance Act, 2021 inserted two new sections 206AB and 206CCA in the Income-tax Act 1961
(hereinafter referred to as "the Act") which takes effect from 1st day of July, 2021.
These sections mandate tax deduction (section 206AB) or tax collection (section 206CCA)
at higher rate in case of certain non-filers (specified persons) with respect to tax
deductions (other than under sections 192, 192A, 194B, 194BB, I 94LBC and I 94N) and tax
collections.
Higher rate is twice the prescribed rate or 5%, whichever is higher.
9/30/2022
Continuation…

Applicability
 The term “specified person” is defined in sub-section (3) of section 206AB
who satisfies the following conditions
 A person who has not filed the Income Tax Return for two previous years
immediately prior to the previous year in which tax is required to be
deducted;
 The time limit of filing return of income under sub-section (1) of section 139
is expired; and
 The aggregate tax deducted at source or tax collected at source, as the
case maybe, is Rs. 50,000 or more in each of the two previous years
9/30/2022
Continuation…

Not Applicable
 The nature of the transaction can be any transaction excluding the following:
 Salary
 Premature withdrawal of EPF
 Winnings from any lottery or card games or crossword puzzles
 Payments to contractor
 Income with respect to investment in securitisation trust
 Winnings from any horse races
 TDS on cash withdrawals
9/30/2022
Continuation…

Applicability
Section 206AA and 206CC are applicable in case where the person fails to furnish the PAN, in which
case the person who is responsible for deducting / collecting the tax, as the case maybe, is required to
apply the tax rate at the higher of the following:
Note: In case of section 194-O, maximum TDS applicable is 5% instead of 20%
9/30/2022

Compliance Check for Sections 206AB & 206CCA (Circular No:11/2021-dated 21.07.2021)
 This functionality is made available through reporting portal of the Income-tax Department. The tax deductor
or the collector can feed the single PAN (PAN search) or multiple PANs (bulk search) of the deductee
or collectee and can get a response from the functionality if such deductee or 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 Conn of downloadable file which can be kept for record
 The deductor or the collector may check the PAN in the functionality at the beginning of the financial year
and then he is not required to check the PAN of non-specified person during that financial year
 let us assume that a deductor has 10,000 vendors that he deals with. He can use the functionality in the bulk
search mode and can get the result of all these 10,000 PANs at one go. Let us assume that the functionality
has shown that out of these 10,000 PANs, 5 PANs arc specified persons for the purposes of sections 206AB and
206CCA of the Act. Now with respect of the remaining 9,995 PAN, it is clear that they arc not in the list of
specified persons for that financial year. Since no new name would be added in the list of specified persons
during the financial year, the deduct or collector can be assured that these 9,995PANs would remain outside
the list of specified persons during that financial year. Thus, deduct or or collector need not check again with
respect to these 9,995 PANs during that financial year. There are chances that the 5 PANs which arc of
specified persons may move out of the list during the financial year and for that there will be need to recheck
at the time of making tax deduction or tax collection.
9/30/2022

Illustration
A company makes a contract payment of Rs. 80 lakhs to Mr P for the preceding two previous
years (FY 2019-20 and FY 2018-19). The tax was deducted at 1% (Rs. 80,000 each year) by
the company.
Mr P did not file his IT return for both the years and the due date of filing the return has
expired.
Hence, when the company deducts tax in the FY 2020-21 and learns that the payee has not
filed his ITR for the last two years, the TDS should be deducted at higher of the following:
i. Twice the rate prescribed in the Act, i.e. 2% (twice of 1%), or
ii. 5%
Hence, the tax should be deducted at the rate of 5%.
Further, if PAN is not furnished, then TDS shall be deducted at the rate of 20%, which is higher
than 5% or 2% (twice of 1%)
9/30/2022

Thank You
9/30/2022

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