NEW TDS AND TCS SECTION- 194O, 206C(1H), 194Q, 206AB, 206CCA-A SYNOPSIS & IMPLEMENTATION GUIDE-CA. PRATIK NIYOGI, FCA
TDS u/s 194O-Applicable from 1.10.2020
E-commerce operators should deduct @1% TDS on the gross amount of sales of goods or services facilitated by e-commerce operators through digital or electronic platform to the participants. The TDS rate of 1% would apply either at the time of credit to the e-commerce participants or payment by any mode or where purchaser of goods or services making payment directly to e-commerce participants.
Exceptions-An individual or HUF only, where the aggregate gross sale of goods or services or both is not likely to exceed INR 5 Lakhs during the FY; and such person has furnished PAN or an aadhar to the e-commerce operator.
TCS u/s 206C (1H) – Applicable from 1.10.2020
As per this provision, sellers are required to collect tax at the source on the sale of goods if the aggregate value of such sale exceeds Rs.50 lakh during the relevant financial year. TCS should be collected at the time of receipt of such an amount.
This provision applies only to a seller whose gross turnover exceeds Rs.10 crore during the financial year preceding the FY in which such sale is carried out.
TCS is calculated inclusive of GST Value.
TDS u/s 194Q-Applicable from 1.07.2021
Provision – Section 194Q of Income-Tax Act
A person (Purchaser) will be liable to deduct TDS if-
1. His Turnover during last year exceeds Rs.10 crores. AND
2. Purchaser purchases of goods of Value exceeding Rs.50 Lakhs (Including GST) in the current year from a Seller (PAN-Wise). AND
3. Purchase is made from a Resident Supplier.
Rate of TDS:- 0.1% of Total Value of Transaction. If PAN of Seller is not provided to Buyer, TDS@5% is to be deducted.
Time Limit for deduction of TDS:- Earlier of payment or Credit to Account of Seller. Proviso to said section clarifies that even if the amount is credited to any account whether it be Suspense or any other, such credit shall be deemed to be Credited to Account of Seller and TDS shall apply accordingly.
Non-compliance of section 194Q:- Aspersection40a(ia)ofIncomeTax Act 1961, if the Buyer fails to deduct TDS, 30% of the expenditure will be disallowed.
Cases when TDS is not deductible:-
1. If TDS is deductible under any other provision or
2. TCS is collectible under section 206C [excluding 206C(1H)]
(Memorandum to Finance Act, 2021 clarifies that in case of a where both TDS under this Section and TCS under Section 206C(1H) is applicable, then only TDS u/s 194Q shall be deductible.)
Sec 206AB & Sec 206CCA Section 206AB mandates the person to deduct TDS at a higher rate in case of non-filing of an income tax return by the specified person, whereas section 206CCA mandates the person to collected TCS at a higher rate in case of non-filing of an income tax return by the specified person.
Rate of TDS – Higher of
1) 2 times applicable rate of TDS / TCS
2) At the rate of 5%
If the provision of section 206AA/206CC (doesn’t have PAN or Aadhaar), applies to a specified person, in addition to the provision of this section, the tax shall be deducted at higher of the rates provided in this section and in section 206AA/206CC
Definition of Specified Person:- includes the person who satisfies all the following criteria-
1) He has not filed ITR for both of the last 2 years whose due date of ITR is expired. AND
2) More than Rs. 50000/- total TDS AND TCS has been deducted in his case for both of the last 2 year.
Circumstances where provisions are Not Applicable –
1) Deductee is a non-resident who does not have a permanent establishment in India.
2) TDS is applicable under any of the sections, section 192 Salary, TDS on Premature withdrawal from EPF, TDS on winnings from lotteries, TDS on winnings from horse races, TDS on investment in securitization fund , TDS on Payment of a certain amount in cash.
CLARIFICATION FOR USE OF FUNCTIONALITY UNDER SECTION 206AB AND 206CCA OF THE INCOME-TAX ACT, 1961
To ease compliance burden the Central Board of Direct Taxes has issued a new functionality “Compliance Check for Sections 206AB & 206CCA”. This functionality is already functioning through reporting portal of the Income-tax Department
(https:// report.insight.gov.in).
The tax deductor/collector can feed the single PAN (PAN search) or multiple PANs (bulk search) of the deductee/ coIIectee and can get a response from the functionality if such deductee/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 form of downloadable file which can be kept for record.
The logic of the functionality has been explained through CBDT Circular No. 11 of 2021 dated 21st June, 2021 available at (https://www.incometaxindia.gov.in/c ommunications/circular/circular_11_ 2021.pdf). The Circular has further eased the burden of the tax deductors/collectors by ensuring that the deductors/collectors need to check the PAN in the functionality at the beginning of the financial year without there being any need to check the PAN of the non-specified person again during that financial year.
With this new functionality, the Government has reiterated its commitment to ease the compliance burden of taxpayers.
Circular No. 11/2021; Dated: June 21, 2021
Sub.: Circular regarding use of functionality under Section 206AB and 206CCA of the Income-tax Act, 1961- reg.
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, 194LBC and 194N) and tax collections.
Higher rate is twice the prescribed rate or 5%, whichever is higher. Specified person means a person who satisfies both the following conditions: –
(i) He has not filed the returns of income for both of the two assessment years relevant to the two previous years immediately before the previous year in which tax is required to be deducted /collected. Two previous years to be counted are required to be those whose return filing date under sub-section (1) of section 139 has expired.
(ii) Aggregate of tax deducted at source and tax collected at source is rupees fifty thousand or more in each of these two previous years.
2. It can be seen that the tax deductor or the tax collector is required to do a due diligence of satisfying himself if the deductee or the collectee is a specified person. This can lead to extra compliance burden on such tax deductor or tax collector. To ease this compliance burden the Central Board of Direct Taxes is issuing a new functionality “Compliance Check for Sections 206AB & 206CCA“. 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 form of downloadable file which can be kept for record.
3. The logic of the functionality is as under:
• A list of specified persons is prepared as on the start of the financial year 2021-22, taking previous years 2018-19 and 2019-20 as the two relevant previous years. List contains name of taxpayers who did not file return of income for both assessment years 2019-20 and 2020-21 and have aggregate of TDS and TCS of fifty thousand rupees or more in each of these two previous years.
• During the financial year 2021-22, no new names are added in the list of specified persons. This is a taxpayer friendly measure to reduce the burden on tax deductor and collector of checking PANs of non-specified person more than once during the financial year.
• If any specified person files a valid return of income (filed & verified) for assessment year 2019-20 or 2020-21 during the financial year 2021-22, his name would be removed from the list of specified persons. This would be done on the date of filing of the valid return of income during the financial year 2021-22.
• If any specified person files a valid return of income (filed & verified) for assessment year 2021-22, his name would be removed from the list of specified persons. This will be done on the due date of filing of return of income for A.Y. 2021-22 or the date of actual filing of valid return (filed & verified) whichever is later.
• If the aggregate of TDS and TCS, in the case of a specified person, in the previous year 2020-21, is less than fifty thousand rupees, his name would be removed from the list of specified persons. This would be done on the first due date under sub-section (1) of section 139 of the Act falling in the financial year 2021-22. For the financial year 2021 -22 this due date of 31st July 2021 has been extended to 30th Sept 2021.
• Belated and revised TCS& TDS returns of the relevant financial years filed during the financial year 2021-22 would also be considered for removing persons from the list of specified persons on a regular basis.
4. 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. To illustrate, 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 are 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 are 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 deductor or collector can be assured that these 9,995 PANs would remain outside the list of specified persons during that financial year. Thus, deductor 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 are 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.
5. The list would be drawn afresh at the start of each financial year and the above process would have to be repeated. For example, at the beginning of the financial year 2022-23 a fresh list would be prepared with previous years 2019-20 and 2020-21 as the two relevant previous years. Then, no name would be added to the list of specified persons during the financial year and only name would be removed based on the logic given in the 3rd to 6th bullets of paragraph 3 above.
CIRCULAR NO. 13 OF 2021, DATED 30-06-2021
CBDT issues guidelines to clarify provisions related to TDS u/s 194Q on purchase of goods
Editorial Note : Finance Act, 2021 inserted a new section 194Q which takes effect from 01-07-2021. It provides for deduction of tax at source on payment made for the purchase of goods (subject to fulfilment of prescribed conditions). The Board, with the prior approval of Central Government, has issued guidelines for removing certain difficulties in implementing the provisions of section 194Q.
NOTIFICATION F. NO. CIT (NAFAC)-1/2021 -22/203, DATED 29-06-2021
New e-Filing portal i.e., www.incometax.gov.in is designated as web portal for Faceless Assessment & Penalty.
Editorial Note : CIT (National Faceless Assessment Centre) has designated the web portal www.incometax.gov.in as the “designated portal” for the purpose of Faceless Assessment in terms of Explanation (i) to section144B(1) of the Income-tax Act.
A kind gesture from CBDT: Extension in due-dates and tax exemption for compensation
Editorial Note : The CBDT has recently extended the due dates for certain compliances and has also announced to provide tax exemption for the expenditure incurred by the taxpayers on COVID-19 treatment.
A. Tax exemption
Many taxpayers have received financial help from their employers and well-wishers for meeting their expenses incurred for treatment of COVID-19. In order to ensure that no income tax liability arises on this account, it has been decided to provide income-tax exemption to the amount received by a taxpayer for medical treatment from employer or from any person for treatment of COVID-19 during FY 2019-20 and subsequent years.
B. Extension of Timelines
In view of the impact of the Covid-19 pandemic, taxpayers are facing inconvenience in meeting certain tax compliances and also in filing response to various notices. In order to ease the compliance burden of taxpayers during this difficult time, reliefs are being provided through Notifications nos. 74/2021 & 75/2021 dated 25th June, 2021 Circular no. 12/2021 dated 25th June, 2021. These reliefs are:
1. Objections to Dispute Resolution Panel (DRP) and Assessing Officer under section 144C of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for which the last date of filing under that section is 1st June, 2021 or thereafter, may be filed within the time provided in that section or by 31st August, 2021, whichever is later.
2. The Statement of Deduction of Tax for the last quarter of the Financial Year 2020-21, required to be furnished on or before 31st May, 2021 under Rule 31 A of the Income-tax Rules,1962 (hereinafter referred to as “the Rules”), as extended to 30th June, 2021 vide Circular No.9 of 2021, may be furnished on or before 15th July, 2021.
3. The Certificate of Tax Deducted at Source in Form No.16, required to be furnished to the employee by 15th June, 2021 under Rule 31 of the Rules, as extended to 15th July, 2021 vide Circular No.9 of 2021, may be furnished on or before 31st July, 2021.
4. The Statement of Income paid or credited by an investment fund to its unit holder in Form No. 64D for the Previous Year 2020-21, required to be furnished on or before 15th June, 2021 under Rule 12CB of the Rules, as extended to 30th June, 2021 vide Circular No.9 of 2021, may be furnished on or before 15th July, 2021.
5. The Statement of Income paid or credited by an investment fund to its unit holder in Form No. 64C for the Previous Year 2020-21, required to be furnished on or before 30th June, 2021 under Rule 12CB of the Rules, as extended to 15th July, 2021 vide Circular No.9 of 2021, may be furnished on or before 31st July, 2021.
6. The application under Section 10(23C), 12AB, 35(1)(ii)/(iia)/(iii) and 80G of the Act in Form No. 10A/ Form No.10AB, for registration/ provisional registration/ intimation/ approval/ provisional approval of Trusts/ Institutions/ Research Associations etc., required to be made on or before 30th June, 2021, may be made on or before 31St August, 2021.
7. The compliances to be made by the taxpayers such as investment, deposit, payment, acquisition, purchase, construction or such other action, by whatever name called, for the purpose of claiming any exemption under the provisions contained in Section 54 to 54GB of the Act, for which the last date of such compliance falls between 1st April, 2021 to 29th September, 2021 (both days inclusive), may be completed on or before 30th September, 2021.
8. The Quarterly Statement in Form No. 15CC to be furnished by authorized dealer in respect of remittances made for the quarter ending on 30th June, 2021, required to be furnished on or before 15th July, 2021 under Rule 37 BB of the Rules, may be furnished on or before 31st July, 2021.
9. The Equalization Levy Statement in Form No. 1 for the Financial Year 2020-21, which is required to be filed on or before 30th June, 2021, may be furnished on or before 31St July, 2021.
10. The Annual Statement required to be furnished under sub-section (5) of section 9A of the Act by the eligible investment fund in Form No. 3CEK for the Financial Year 2020-21, which is required to be filed on or before 29th June, 2021, may be furnished on or before 31st July, 2021.
11. Uploading of the declarations received from recipients in Form No. 15G/15H during the quarter ending 30th June, 2021, which is required to be uploaded on or before 15th July, 2021, may be uploaded by 31st August,2021.
12. Exercising of option to withdraw pending application (filed before the erstwhile Income Tax Settlement Commission) under sub-section (1) of Section 245M of the Act in Form No. 34BB, which is required to be exercised on or before 27th June, 2021, may be exercised on or before 31st July,2021.
13. Last date of linkage of Aadhaar with PAN under section 139AA of the Act, which was earlier extended to 30th June, 2021 is further extended to 30th September, 2021.
14. Last date of payment of amount under Vivad se Vishwas(without additional amount) which was earlier extended to 30th June, 2021 is further extended to 31st August, 2021.
15. Last date of payment of amount under Vivad se Vishwas (with additional amount) has been notified as 31st October, 2021.
16. Time Limit for passing assessment order which was earlier extended to 30th June, 2021 is further extended to 30th September, 2021.
17. Time Limit for passing penalty order which was earlier extended to 30th June, 2021 is further extended to 30th September, 2021.
18. Time Limit for processing Equalisation Levy returns which was earlier extended to 30th June, 2021 is further extended to 30th September, 2021.
SUBMISSION OF 15CA & 15CB he submission process of Form 15CA Part-C and Form 15CB has been revamped. Under the revised process, the taxpayer has to select Form 15CA Part-C radio button under File Income-Tax Forms. The taxpayer is expected to provide certain details of Remitter, Remittee, CA and related attachments and assign CA from whom Form 15CB is required for the relevant Financial Year. After the CA has accepted request for Form 15CB, the CA is expected to File Form 15CB which would be available under the Worklist (For Your Action) of CA. Once CA has accepted taxpayer’s request, the details in Form 15CB shall be prefilled. After the CA has submitted Form 15CA by providing rest of the data, the taxpayer is expected to go to Worklist (For Your Action) and is required to “Accept” the submitted Form 15CB.
After acceptance, the details in Part-C of Form 15CA will be prefilled from accepted Form 15CB. The taxpayer is expected to provide rest of the details and submit Form 15CA Part-C. In case, any information provided either by the taxpayer or CA is incorrect or require modification, Part-C of Form 15CA and Form 15CB can be Revised by repeating the above process. For detailed process, refer Form 15CA/15CB User Manuals under “Help” section.
RECENT JUDICIAL RULINGS ON INCOME TAX
SECTION 68 OF THE INCOME-TAX ACT, 1961 – CASH CREDIT
Share capital : Where assessee-company received share capital/share premium from various entities and assessee had submitted share application form, copy of share certificates, copy of board resolution, certificate of incorporation etc. with respect to all investor entities and all investor entities had sufficient net worth to make investment in assessee-company, additions made to income of assessee as unexplained cash credit under section 68 were to be deleted –
Moongipa Dev. & Inf. Ltd. v. Deputy Commissioner of Income Tax, Mum. – [2021] 127 taxmann.com 808 (Mumbai – Trib.)
SECTION 92 OF THE INCOME-TAX ACT, 1961 – TRANSFER PRICING – GENERAL
Transaction with AE alone are covered : ALP and consequential transfer pricing adjustments are contemplated only in respect of international transactions with AEs and not entity level transactions (which also include transactions with non-AEs) – Rieter India (P.) Ltd. v. Deputy Commissioner of Income Tax Circle-5, Pune – [2021] 127 taxmann.com 810 (Pune – Trib.)
SECTION 92C OF THE INCOME- TAX ACT, 1961 – TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE
Adjustments – Operating profit/Cost, Computation of : Once expenses incurred by assessee have been finally included in its total operating costs, similar natured costs incurred by comparables, if any, should also be given a parallel treatment – Rieter India (P.) Ltd. v. Deputy Commissioner of Income Tax Circle-5, Pune – [2021] 127 taxmann.com 810 (Pune – Trib.)
SECTION 115JB OF THE INCOME- TAX ACT, 1961 – MINIMUM ALTERNATE TAX – PAYMENT OF
Unabsorbed depreciation : Losses (both cash loss and depreciation loss) would continue to remain in books of account till it is wiped off by earning profits by assessee
company and, accordingly, same would be available for reduction from book profits under section 115JB – GO Airlines (India) Ltd. v. Deputy Commissioner of Income Tax, Mumbai – [2021] 127 taxmann.com 803 (Mumbai – Trib.)
SECTION 226 OF THE INCOME- TAX ACT, 1961 – COLLECTION AND RECOVERY OF TAX
Other modes of recovery : Where revenue already had amount earlier deposited by assessee with Commissioner (Appeals) in relation to earlier Assessment year which corresponded to more than 20 per cent of demand amount for relevant assessment year, issuance of impugned notice to assessee’s bank to recover demand amount was not justified – Siolim Urban Co-op. Credit Society. Ltd. v. Commissioner of Income Tax (Appeal) Goa – [2021] 127 taxmann.com 812 (Bombay)
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