The Indian Finance Budget for 2020 and 2021 has brought various amendments to TDS provisions to include the Assessees’ who were erstwhile not in the ambit of TDS and to collect TDS from non- income tax return filers at higher rates. This article will focus on the TDS sections that will be effect from July 01,2021 and the existing sections that will have different purview from July 01,2021.

Section 206AB – Resident

A tax deductor should ensure that from July 01,2021 TDS is deducted at:

1. twice the rate specified in the Act or
2. 5%

Whichever is higher, if the person from whom the tax is deducted has:

1. Not filed their income tax returns for immediately two preceding financial years, for which the due date has expired and
2. Aggregate TDS amount is equal to or more than INR 50,000 in each of the two previous years.

Section 206CCA – Resident

A tax collector should ensure that from July 01,2021 TCS is collected at:

1. twice the rate specified in the Act    or
2. 5%

Whichever is higher, if the person from whom the tax is collected has:

1. Not filed their income tax returns for immediately two preceding financial years, for which the due date has expired      and
2. Aggregate TCS amount is equal to or more than INR 50,000 in each of the two previous years.

194Q – TDS on purchase of goods – Resident / Non resident

A tax deductor should ensure that from July 01,2021 TDS is deducted at 0.1% of amount paid to the person (including GST amount, unlike service invoices) if :

1. Payment is made towards purchase of goods and
2. If the turnover of the tax deductor is more than INR 10 crores in the previous year  and
3. If the transaction between the tax deductor and the person from whom tax is deducted exceeds INR 50 Lakhs in a financial year (for this period, it will be considered from April 01, 2021, though it is applicable only from July 01, 2021)

Points to be Noted

• The amount deductible as TDS is over and above the INR 50 Lakh rupees.
• 5% if there is no PAN/Aadhar with person to whom payment is made.

206 C (1H) – TCS On Sale Of Goods – Resident / Non Resident

A tax collector should ensure that from October 01,2020 TCS is deducted at 0.1% of amount received from the person (including GST amount, unlike service invoices) if :

1. Amount received is made towards sale of goods    and
2. If the turnover of the tax collector is more than INR 10 crores in the previous year                 and
3. If the transaction between the tax collector and the person from whom tax is collected exceeds INR 50 Lakhs in a financial year (for this period, it will be considered from April 01, 2020, though it is applicable only from October 01, 2020)

Points to be Noted

• 5% if there is no PAN/Aadhar with person from whom amount is received.
• Not Applicable if section 194Q is applicable to the buyer.
• Not Applicable on imports and purchase by Central Govt or State Govt or Local Authority
• The amount collectable as TCS is over and above the INR 50 Lakh rupees.

194 Q vs 206 C (1H) Case to Case Analysis

Buyers Turnover in PY	Sellers Turnover in PY	Transaction Value in CY	Applicability
5 Crore	15 Crore	60 Lakhs	206 C (1H)
15 Crore	5 Crore	60 Lakhs	194 Q
15 Crore	15 Crore	60 Lakhs	194 Q
5 Crore	5 Crore	40 Lakhs	Both not applicable
15 Crore	5 Crore	40 Lakhs	Both not applicable
5 Crore	15 Crore	40 Lakhs	Both not applicable

Overall Summary

Section	Applicability	Effective Date	Turnover	Transaction Limit	TDS / TCS Limit	ITR for preceding 2 FYs’	Rate
206 AB	OnlyResidents	July 01, 2021	NA	NA	> 50,000	Not Filed	NA
206CCA	OnlyResidents	July 01, 2021	NA	NA	> 50,000	Not Filed	NA
194 Q	Resident / Non-Resident	July 01, 2021	10 Crore	50 Lakhs	NA	NA	0.1%*
206 C (1H)	Resident / Non-Resident	October 01, 2020	10 Crore	50 Lakhs	NA	NA	0.1%*

How to Check Compliance of Vendor/Customer ?

Obtaining declaration from your Vendor/ Customer

The Assessee should prepare a format of declaration addressing to themselves from the Vendor/Customer in letter head of the customer. The format should be circulated to the Vendor/Customer and the same should be filled, signed, sealed and collected by the Assessee. The following points should form part of the declaration:

• Whether the Vendor / Customer have filed their income tax returns for preceding two years

• Whether their aggregate TDS/TCS is greater than 50,000 in previous year

• To confirm if the turnover in PY is > 10 Crore, which decides applicability of 194Q/206C (1H) – If 194 Q is not applicable then 206 (1H) is applicable and vice versa, so it is advisable to get confirmation if the turnover of the assessee exceeds INR 10 Crore.

• PAN of the Vendor/Customer

• ITR Acknowledgement number for past two years

To verify from the new income tax portal

Circular No.11/2021 dated June 21, 2021 issued by CBDT, briefs about the functionality available for the tax deductors / collectors in the new Income Tax portal to check if the person from whom tax is deducted or collected has filed their income tax returns and if their aggregate TDS/TCS exceeds 50,000 with the help of their PAN, for compliance under Section 206AB and 206CCA. The site holds a list of specified persons who have not complied with conditions under 206AB and 206CCA.

Visit https://www.incometax.gov.in/ to verify the details of person from whom tax is deducted/collected.

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