01st July, 2021
1. TDS u/s.194Q on purchase of any goods exceeding Rs.50 Lakhs on or after 01/07/2021
a. Under section 194Q requires the Buyer whose turnover during preceding financial year (FY 2020-21) exceeds Rs. 10 crore shall be liable to deduct tax at sources (TDS) at the rate 0.1%, at the time of payment or credit to the seller, whichever is earlier, on purchase of any goods with value or aggregate value exceeding Rs.50 Lakhs during any financial year. This provision will come into force w.e.f 01/07/2021.
b. In regard to above, please confirm whether
i. Your Customer’s Turnover during FY 2020-21 exceeded Rs.10 Crore and
ii. Your customer shall start the deduction of tax at sources (TDS) in accordance with the provision of section 194Q w.e.f 01/07/2021.
c. It may be noted that there is an interplay between TDS (u/s. 194Q) and TCS (u/s. 206C(1H)) provision. (i.e. if buyer is liable for TDS, seller shall not collect TCS). Therefore, unless you confirmation from your customer, you should continue/collect TCS (if applicable) u/s. 206C(1H).
2. Declaration for filing status of Income Tax Return in order to ensure that TDS shall not be deducted at higher rate as per section prescribed u/s.206AB being special provision for non-filer of income tax return.
a. Section 206AB inserted vide Finance Act 2021, provides for TDS at higher rate, if seller of goods has not filed return of income for two immediate preceding previous year for which time limit prescribed u/s.139(1) has expired and the aggregate amount of TDS or TDS and TCS (if applicable) exceeds Rs.50,000/- or more in each of these two previous years.
b. In this connection, you are required to take declaration from your vendors / service providers that they have filed last two years Income Tax Returns within time limit prescribed u/s.139(1). Else, deduct TDS at higher rate.
Point No.3 applicable in cases where your customer PAN based Turnover in FY 2020-21 is not exceeding Rs.10 cr. and he is not liable for TDS u/s.194Q as per Point No.1
3. Declaration for filing status of Your (Customer) Income Tax Return in order to ensure that TCS shall not be collected by us at higher rate as per section prescribed u/s. 206CCA being special provision for non-filer of income tax return.
Section 206CCA inserted vide Finance Act 2021, provides for TCS at higher rate, if buyer of goods has not filed return of income for two immediate preceding previous year for which time limit prescribed u/s.139(1) has expired and the aggregate amount of TDS or TDS and TCS (if applicable) exceeds Rs.50,000/- or more in each of these two previous years.
c. The higher rate of TCS u/s.206CCA shall be as under;
i. at twice the rate specified in relevant provision of Act; or
ii. at the rate of five per cent
d. In view of above provision, we herewith request you to provide us the declaration confirming the filing status for your Income tax Returns for the FY. 2018-19 and FY. 2019-20. Please note section provides for the return of income which have been filed within the due date prescribed u/s.139(1) and not the return filed u/s.139(4) i.e Belated Return. Hence, if returns were filed late then higher rate of TDS shall be applicable in spite of filing of such returns.
e. In case of non-receipt of declaration, TCS shall be collected at higher rate as mentioned above.
Understand it here in Video Format
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