The new TDS rates as amended by the Finance Act 2021 will be effective from 1st July 2021. These rules relay that tax deduction or tax collection will be carried out at a higher rate in case certain businesses fail to file their income tax returns.
Here is everything you need to know about the changes
TDS on Purchase of Goods: Section 194Q
A new section 194Q for TDS on purchase of goods has been introduced, which will be effective from 1st July 2021 with the following rules –
(1) If a purchaser’s turnover in the previous year exceeded Rs.10 crore and the purchases are worth more than Rs.50 lakh from a seller in the current year, they will be required to deduct TDS from 1st July 2021.
(2) TDS will be deducted at a rate of 0.1% on purchases above Rs. 50 lakh. However, if the vendor does not furnish a PAN, TDS will be deducted at a rate of 5%.
(3) If TDS is deductible under any other provision or TCS is recoverable other than TCS u/s 206C(1H), i.e. on sale of goods, the provisions of this section will not apply.
Please note that the above provisions of section 194Q are not applicable when the seller is a non-indian resident.
High TDS rate for ITR non-filers
Section 206AB demands the tax deductor to verify whether the vendor has filed their ITR for the previous 2 financial years if the TDS amount exceeds Rs. 50,000. Businesses and individuals can check if the vendor is TDS compliant by submitting the 10-digit PAN (Permanent Account Number) on the Income-tax portal.
In case the ITR has not been submitted, TDS will be deducted at twice the existing rate, or at 5% rate, whichever rate is higher. Meanwhile, for TCS collection, it will be double the rate mentioned in 206 CCA; or 5 %, whichever is highest.
Income from salary, payments to provident funds (PF), TDS applicable on lotteries, and horse racing earnings have been exempted from the new TDS norms.
We hope this helps you plan your TDS payments smoothly for the month of July.
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