TDS on Purchase transaction introduced in Budget 2021

TDS on Purchase transaction introduced in Budget 2021

Provision of Section 194Q – Simplified (effective from 1^st July 2021)

 

    â™¦ Who need to deduct tax â€“ Resident Purchaser/Buyer of Goods, whose sales/turnover in immediately preceding financial year is more than Rs.10 Crores (excluding GST)

 

    â™¦ From whom to Deduct - The tax to be deducted only from such seller, from whom purchases are made (of goods) for Rs.50 Lakhs or more in aggregate during the year. It may be noted that tax to be deducted on the date of payment or credit whichever is earlier.

 

    â™¦ How much to Deduct - Need to deduct tax at source (TDS) @0.1% of purchases. On non-furnishing of PAN by the seller, TDS will be @5%.

 

    â™¦ What is the base amount for calculation of TDS â€“ TDS amount will be calculated on aggregate purchases in excess of Rs.50 Lakhs. No tax to be deducted for purchases upto Rs.50 Lakhs.

 

Provision of Section 206C(1H) –

 

    â™¦ Who need to collect the tax â€“ Resident Seller of Goods (not services), whose sales/turnover in immediately preceding financial year is more than Rs.10 Crores (excluding GST)

 

    â™¦ From whom to collect - The tax to be collected only from such purchaser, who has made payment against purchase of goods for Rs.50 Lakhs or more in aggregate during the year. It may be noted that tax to be collected at the time of receipt of payment and not at the time of issuing invoice.

 

    â™¦ How much to collect - Need to collect tax at source (TCS) @0.1% of sale consideration received. On non-furnishing of PAN by the purchaser, TCS will be @1.0%. As a relief measure in Covid-19 situation, TCS rates are reduced to 75% of the original amount till 31st March 2021. Consequently, TCS rate would be 0.075% or 0.75% (in no PAN cases) till 31st March 2021.

 

    â™¦ What is the base amount for calculation of TCS â€“ TCS amount will be calculated on the amount received as a sale consideration in excess of Rs.50 Lakhs. No tax to be collected upto receipt of Rs.50 Lakhs.

 

    ♦ Not Applicable to - Transaction on which TDS/TCS is applicable under other provisions of the act and the same has been complied with. Meaning thereby; in a situation where TDS u/s 194Q has been deducted, Section 206C(1H) will not apply. 

Examples:-