New TDS and TCS provisions applicable from Financial Year 2021-22

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Like every year, this year also the Finance Minister Smt. Nirmala Sitharaman has introduced new provisions to bring more transactions within the ambit of TDS (Tax Deducted at Source), like the purchase of goods. Further, to ensure filing of return of income by the person who has suffered a reasonable amount of TDS/TCS, the rate of deduction or collection of tax has been increased for non-filers of return of income. The Finance Act, 2021, has introduced the following new provisions regarding deduction or collection of tax at source:

  1. TDS on purchase of Goods (Applicable from 01-07-2021);
  2. TDS on Pension income of Senior citizens (Applicable from 01-04-2021);
  3. Higher rate of TDS or TCS in case of non-filers of Income-tax Return (Applicable from 01-07-2021)

TDS on Purchase of Goods [Section 194Q]

A buyer shall deduct tax under this provision from the value of goods purchased by it if the following conditions are satisfied:

  • His total sales, gross receipts, or turnover from the business carried on by him exceeds Rs. 10 crores during the financial year immediately preceding the financial year in which he purchases the goods,
  • There is a purchase of goods from a resident person;
  • Value or aggregate value of Goods purchased exceeds Rs. 50 lakhs in any previous year;
  • The buyer should not be on the list of persons excluded from the provision for deduction of tax; and
  • No tax is deductible or collectible under any other provision except Section 206C(1H).

Buyer shall deduct tax at the rate of 0.1% of the purchase value exceeding Rs. 50 lakhs at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier. The tax shall be deducted even if the sum is credited to the ‘Suspense Account’.

TDS on Pension income of Senior citizens [Section 194P]

Specified bank, being a banking company notified by the Central Government, shall deduct tax under this provision if the following conditions are satisfied by the deductee:

  • He is a resident senior citizen;
  • His age during the relevant previous year is 75 years or more;
  • He receives pension income in the bank account maintained with the specified bank;
  • He does not have any other income except interest income received or receivable from any account maintained in the same specified bank in which he is receiving his pension income; and
  • Such individual furnished a declaration to the specified bank containing such particulars, in such form and verified in such manner, as may be prescribed.

Such a bank shall compute the total income of the deductee after allowing deduction under Chapter VI-A and rebate under Section 87A and deduct tax thereon based on the rates in force.

Further, if specified bank deducts tax under this provision, the resident senior citizen shall not be liable to file his return of income for the assessment year relevant to the previous year in which tax has been deducted.

Higher rate of TDS or TCS in case of non-filers of Income-tax Return [Section 206AB and Section 206CCA]

Section 206AB provides for deduction of tax at higher rates if tax is deductible under any provision on any sum or income or the amount paid, or payable or credited, by a person to a specified person. However, this provision is not applicable where tax is deductible under the following provisions:

  • Section 192: TDS on Salary;
  • Section 192A: TDS on withdrawal from EPF;
  • Section 194B: TDS on winning from lotteries, crossword puzzles, etc.
  • Section 194BB: TDS on winning from racehorses;
  • Section 194LBC: TDS on income in respect of investment in Securitization Trust;
  • Section 194N: TDS on cash withdrawal.

Specified person means a person:

  • Who has not filed the return of income for both of the two assessment years relevant to the previous years immediately before the previous year in which tax is required to be deducted;
  • The due date to file such return of income, as prescribed under Section 139(1), has expired; and
  • The aggregate amount of tax deducted and collected at source is Rs. 50,000 or more in each of these two previous years.

However, this provision is not applicable in case of a non-resident who does not have a permanent establishment in India.

Deductor shall deduct tax under this provision at the higher of the following rates:

  • Twice the rate specified in the relevant provision of the Act;
  • Twice the rate or rates in force; or
  • 5%.

However, where both the provision of this section and Section 206AA are applicable, that is, the deductee has neither furnished his PAN to the deductor nor has he furnished his return of income for the specified periods, the deductor shall deduct tax at the rates provided in this section or in section 206AA, whichever is higher.

A similar Section 206CCA has been inserted to provide that the collector shall collect tax at a higher rate if the collectee does not file the return for the specified period. The collector shall collect tax under this provision at the higher of the following rates:

  • Twice the rate specified in the relevant provision of the Act; or
  • 5%.

However, where both the provision of this section and Section 206CC are applicable, the collector shall collect tax at rates provided in this section or in section 206CC, whichever is higher.

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