Taxmann's TDS Ready Reckoner

CONTENTS E G A P

Alphabetical TDS Reckoner

I-9

Deduction of Tax at Source

I-33

DIVISION ONE INTRODUCTION :

1 R E T P A H C

OVERVIEW OF TDS/TCS PROVISIONS

3

DIVISION TWO TAX DEDUCTION AT SOURCE 3 R E T P A H C

: :

4 R E T P A H C

:

5 R E T P A H C 6 R E T P A H C

: :

7 R E T P A H C

:

8 R E T P A H C

:

9 R E T P A H C

:

2 R E T P A H C

: 0 1 R E T P A H C : 1 1 R E T P A H C : 2 1 R E T P A H C

TDS FROM SALARIES (SECTION 192)

15

DEDUCTION OF TAX AT SOURCE FROM EMPLOYEES’ PROVIDENT FUND SCHEME

85

DEDUCTION OF TAX AT SOURCE FROM INTEREST ON SECURITIES

90

DEDUCTION OF TAX AT SOURCE FROM DIVIDENDS

110

DEDUCTION OF TAX AT SOURCE FROM INTEREST OTHER THAN INTEREST ON SECURITIES

130

DEDUCTION OF TAX AT SOURCE FROM WINNINGS FROM LOTTERY OR CROSSWORD PUZZLE

175

DEDUCTION OF TAX AT SOURCE FROM WINNINGS FROM HORSE RACES

183

DEDUCTION OF TAX AT SOURCE FROM PAYMENTS TO CONTRACTORS/SUB-CONTRACTORS

188

DEDUCTION OF TAX AT SOURCE FROM INSURANCE COMMISSION

289

PAYMENT IN RESPECT OF LIFE INSURANCE POLICY

294

DEDUCTION OF TAX AT SOURCE FROM PAYMENTS QUA DEPOSITS UNDER NSS

313

I-5

S T N E T N O C

I-6 E G A P

: 3 1 R E T P A H C : 4 1 R E T P A H C : 5 1 R E T P A H C : 6 1 R E T P A H C : 7 1 R E T P A H C : 8 1 R E T P A H C : 9 1 R E T P A H C : 0 2 R E T P A H C : 1 2 R E T P A H C : 2 2 R E T P A H C : 3 2 R E T P A H C : 4 2 R E T P A H C : 5 2 R E T P A H C : 6 2 R E T P A H C : 7 2 R E T P A H C : 8 2 R E T P A H C : 9 2 R E T P A H C : 0 3 R E T P A H C : A 0 3 R E T P A H C : B 0 3 R E T P A H C : 1 3 R E T P A H C

DEDUCTION OF TAX AT SOURCE FROM PAYMENTS ON ACCOUNT OF REPURCHASE OF UNITS BY MUTUAL FUNDS OR UNITS BY UTI

315

DEDUCTION OF TAX AT SOURCE FROM COMMISSION ON SALE OF LOTTERY TICKETS

320

DEDUCTION OF TAX AT SOURCE FROM COMMISSION OR BROKERAGE PAYMENTS

326

DEDUCTION OF TAX AT SOURCE FROM RENT PAYMENTS

357

DEDUCTION OF TAX AT SOURCE FROM PAYMENT ON TRANSFER OF CERTAIN IMMOVABLE PROPERTY

385

DEDUCTION OF TAX AT SOURCE FROM RENT PAYMENTS IN CERTAIN CASES

403

DEDUCTION OF TAX AT SOURCE FROM JOINT DEVELOPMENT AGREEMENT

410

DEDUCTION OF TAX AT SOURCE FROM FEES FOR PROFESSIONAL OR TECHNICAL SERVICES

416

DEDUCTION OF TAX AT SOURCE FROM INCOME FROM UNITS

464

DEDUCTION OF TAX AT SOURCE ON PAYMENT OF COMPENSATION ON ACQUISITION OF CERTAIN IMMOVABLE PROPERTY

470

INCOME FROM UNITS OF A BUSINESS TRUST

489

INCOME FROM UNITS OF AN INVESTMENT FUND

495

INCOME FROM INVESTMENT IN SECURITISATION TRUST

500

DEDUCTION OF TAX AT SOURCE FROM PAYMENTS

BY INDIVIDUAL/HUF

505

DEDUCTION OF TAX AT SOURCE FROM CERTAIN PAYMENTS IN CASH

513

DEDUCTION OF TAX AT SOURCE FROM PAYMENTS

BY E-COMMERCE OPERATOR TO E-COMMERCE PARTICIPANT

528

DEDUCTION OF TAX IN CASE OF SPECIFIED SENIOR CITIZEN

545

DEDUCTION OF TAX AT SOURCE ON PAYMENT OF CERTAIN SUM FOR PURCHASE OF GOODS

553

DEDUCTION OF TAX ON BENEFIT OF PERQUISITE IN RESPECT OF BUSINESS OR PROFESSION

580

DEDUCTION OF TAX ON PAYMENT ON TRANSFER OF VIRTUAL DIGITAL ASSET

620

DEDUCTION OF TAX AT SOURCE FROM PAYMENTS TO NON-RESIDENTS

643

S T N E T N O C

I-7

E G A P

: 2 3 R E T P A H C : 3 3 R E T P A H C : 4 3 R E T P A H C : 5 3 R E T P A H C : 6 3 R E T P A H C : 7 3 R E T P A H C : 8 3 R E T P A H C : 9 3 R E T P A H C : 0 4 R E T P A H C : 1 4 R E T P A H C : 2 4 R E T P A H C : 3 4 R E T P A H C : 4 4 R E T P A H C : 5 4 R E T P A H C : 6 4 R E T P A H C

DEDUCTION OF TAX AT SOURCE FROM INCOME IN RESPECT OF UNITS OF NON-RESIDENTS

713

DEDUCTION OF TAX AT SOURCE FROM INCOME FROM UNITS PAYABLE TO OFF-SHORE FUNDS

718

DEDUCTION OF TAX AT SOURCE ON INCOME FROM FOREIGN CURRENCY BOND OR GLOBAL DEPOSITORY RECEIPTS OF INDIAN COMPANY

723

DEDUCTION OF TAX AT SOURCE FROM INCOME OF FOREIGN PORTFOLIO INVESTORS FROM SECURITIES

728

GENERAL EXEMPTIONS FROM DEDUCTION OF TDS

734

CERTIFICATE FOR DEDUCTION OF NIL/LOWER TDS (SECTION 197)

738

NON-DEDUCTION OF TAX BASED ON SELF DECLARATION OF DEDUCTEE IN FORM 15G/FORM 15H (SECTION 197A)

756

CREDIT FOR TDS [SECTION 199 READ WITH RULE 37BA]

767

DEPOSIT OF TDS DEDUCTED WITH CENTRAL GOVERNMENT (SECTION 200/RULE 30)

774

FILING OF TDS RETURNS (SECTION 200(3)/RULE 31A)

780

TDS CERTIFICATES (SECTION 203)

797

REQUIREMENT ON PAYEE TO FURNISH PAN/ AADHAAR NUMBER FOR TDS (SECTION 206AA/ RULE 37BC)

811

SPECIAL PROVISION FOR DEDUCTION OF TAX AT SOURCE FOR NON-FILERS OF INCOME-TAX RETURN

821

QUARTERLY RETURNS BY BANKS TO REPORT INTEREST PAYMENTS (SECTION 206A)

828

CONSEQUENCES OF DEFAULT IN OBLIGATIONS RELATING TO TDS

831

DIVISION THREE TAX COLLECTION AT SOURCE 7 4 R E T P A H C

: TAX COLLECTION AT SOURCE

861

DIVISION FOUR STATEMENT ON FINANCIAL TRANSACTIONS 8 4 R E T P A H C

: STATEMENT OF FINANCIAL TRANSACTION

927

30

Deduction of tax at source on payment of certain sum for purchase of goods* Deduction of TDS on payment of certain sums for purchase of goods under section 194Q: Provisions at a glance Payment from which TDS is to be deducted

Payment of any sum to any resident ‘seller’ for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year.

The provisions of section 194Q of the Act shall not be applicable in relation to transactions in securities and commodities which are traded through recognized stock exchanges or cleared and settled by the recognized clearing corporation, including recognized stock exchanges or recognized clearing corporation located in International Financial Service Centre (IFSC) [CBDT’s Circular No.13/2021, dated 30.06.2021] In respect of purchase of power through power exchanges, CBDT has clarified, vide Circular No. 13/2021, dated 30.06.2021, that TDS under section 194Q will not apply to transactions in electricity, renewable energy certificates and energy saving certificates traded through power exchanges registered in accordance with Regulation 21 of the CERC.

Who is liable to deduct TDS

‘Buyer’

*SECTION 194Q.

553

S. 194Q Definition of ‘buyer’

DIV. 2 : TAX DEDUCTION AT SOURCE

554

“buyer” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out. Central Government is empowered to exempt a person from obligation under this section by notification in the Official Gazette. Such exemption may be made subject to fulfilment of conditions as may be specified in that a notification.

In case of any Department of the Government which is not carrying out any business or commercial activity, the primary requirement for being considered as a ‘buyer’ will not be fulfilled.

Accordingly, such an organization will not be considered as ‘buyer’ for the purposes of section 194Q of the Act and will not be liable to deduct tax on the goods so purchased by them.

However, if the said department is carrying on a business/commercial activity, the provision of section 194Q of the Act shall apply subject to the fulfilment of other conditions. Any other person, such as a Public sector Undertaking or corporation established under Central or State Act or any other such body, authority or entity, shall be required to comply with the provisions of section 194Q and tax shall be deducted accordingly. [CBDT’s Circular No. 20/2021, Dated 25-11-2021] The provisions of section 194Q of the Act shall not apply to a non-resident whose purchase of goods from seller resident in India is not effectively connected with the permanent establishment of such non-resident in India. For this purpose, “permanent establishment” shall mean to include a fixed place of business through which the business of the enterprise is wholly or partly carries on. [CBDT’s Circular No. 13/2021, dated 30.06.2021] Under section 194Q of the Act, a buyer is required to have total sales or gross receipts or turnover from the business carried on by him exceeding ten crore rupees during the financial year immediately preceding the financial year in which the purchase of good is carried out.

Since this condition would not be satisfied in the year of incorporation, the provisions of section 194Q of the Act shall not apply in the year of

555

CH. 30 : TDS ON PAYMENT OF CERTAIN SUM

S. 194Q

incorporation. [CBDT’s Circular No.13/2021, dated 30.06.2021] Deductee/Payee

Any resident seller If, for any reason, tax has been collected by the seller under sub-section (1H) of section 206C of the Act, before the buyer could deduct tax under section 194-Q of the Act on the same transaction, such transaction would not be subjected to tax deduction again by the buyer. [CBDT’s Circular No. 13/2021, dated 30.06.2021] The provisions of section 194Q of the Act shall not apply on purchase of goods from a person, being a seller, who as a person is exempt from income tax under the Act (like person exempt under section 10) or under any other Act passed by the Parliament (Like RBI Act, ADB Act etc.)

[CBDT’s Circular No. 13/2021, dated 30.06.2021]

Threshold limit for nondeduction of TDS

Rs. 50,00,000

Tax base i.e. amount on which TDS % is to be applied for computing TDS to be deducted

When tax is deducted at the time of credit of amount in the account of seller and in terms of the agreement or contract between the buyer and the seller, the component of GST comprised in the amount payable to the seller is indicated separately, tax shall be deducted under section 194Q of the Act on the amount credited without including such GST. However, if the tax is deducted on payment basis because the payment is earlier than the credit, the tax would be deducted on the whole amount as it is not possible to identify that payment with GST component of the amount to be invoiced in future.

Tax is required to be deducted at the time of payment or credit, whichever is earlier. Therefore, before purchase return happens, the tax must have already been deducted under section 194Q of the Act on that purchase. If that is the case and against this purchase return the money is refunded by the seller, then this tax deducted may be adjusted against the next purchase against the same seller.

No adjustment is required if the purchase return is replaced by the goods by the seller as in that case the purchase on which tax was deducted under section 194Q of the Act has been completed with goods replaced .

S. 194Q

DIV. 2 : TAX DEDUCTION AT SOURCE

556

Applicable Rate of TDS

0.1%

Rate of TDS if PAN/Aadhaar is not furnished by deductee

5% [See Chapter 43]

Whether provisions of higher TDS rates for non-filers of ITR (section 206AB) is applicable to section 194Q?

Yes. See Chapter 44

Time of deduction

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.

Whether payee can obtain certificate u/s 197 for no deduction of TDS or deduction of tax at a lower rate

No. See Chapter 37

Whether payee can avail the facility of nil deduction of tax by submitting self-declaration in Form No. 15G/Form No. 15H?

No. See Chapter 38

Adjustment of excess/deficiency of TDS deduction from subsequent deduction in same FY

No

Deposit of tax deducted to the credit of Central Govt.

See Chapter 40

Claim for refund

See Chapter 40

Whether Tax Deduction and Collection Account Number required to be obtained by deductor to deduct TDS u/s 194Q?

Yes. See Chapter 1

Furnishing of TDS returns/ statements by deductor to Department

See Chapter 41 TDS returns to be filed in Form No. 26Q Rule 31A requires deductor-buyer to furnish in Form No.26Q the particulars of amount paid or credited on which tax was not deducted in view of sub-section (5) of section 194Q with effect from 1st day of July, 2021. i.e. to say particulars of cases where TDS was not deducted as (I) TDS is deductible under any other provisions; or (II) is collectible under the provisions of section 206C other than a transaction to which sub-section

557

CH. 30 : TDS ON PAYMENT OF CERTAIN SUM

S. 194Q

(1H) of section 206C applies [Write “S” in Column [424](penultimate Column)(Note No. 14 of Form 26Q)] TDS Certificate to be issued by deductor to deductee

Form No. 16A See Chapter 42

Annual statement to payees to be furnished by Department

See Para 39.3

Consequences of non-deduction or short deduction of TDS

See Chapter 46

Disallowance under section 40(a)

Yes—, if purchases are revenue expenditure and claimed as deduction.

Scope and application of section 194Q 30.1 With effect from 01.07.2021, section 194Q provides that any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the ‘seller’) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, 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, deduct an amount equal to 0.1% of such sum exceeding fifty lakh rupees as income-tax.

For the purposes of this sub-section, “buyer” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out. Central Government is empowered to exempt a person from obligation under this section by notification in the Official Gazette. Such exemption may be made subject to fulfilment of conditions as may be specified in that notification.

If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty. [Section 194Q(3)] Every guideline issued by the Board as above shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and the person liable to deduct tax.

Sub-section (3) of section 194Q of the Act empowers the Board (with the approval of the Central Government) to issue guidelines for the purpose of removing difficulties. In exercise of power contained under sub-section (3) of section 194Q of the Act, the CBDT, with the approval of the Central Government, has issued Guidelines for removal of difficulties vide Circular No. 13/2021, dated 30.06.2021.

S. 194Q

DIV. 2 : TAX DEDUCTION AT SOURCE

558

The provisions of this section shall not apply to a transaction on which–– (a) tax is deductible under any of the provisions of this Act; and (b) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies.

This means, if on a transaction a TDS or tax collection at source (TCS) is required to be carried out under any other provision, then it would not be subjected to TDS under this section. There is one exception to this general rule. If on a transaction TCS is required under sub-section (1H) of section 206C as well as TDS under this section, then on that transaction only TDS under this section shall be carried out. Such a situation would arise if turnover of each of both buyer as well as seller exceeded the Rs. 10 crore limit in immediately preceding financial year.

The distinction between the provisions of section 194Q and Section 206C(1H) is as follows: Basis of distinction

TDS on purchase of goods [Section194Q]

TCS on Sale of goods [Section 206C(1H)]

Who is liable for deduction/collection

Buyer - If total sales, gross receipts or turnover of the buyer from the business exceeds Rs. 10 crores during the financial year immediately preceding the financial year in which such goods are purchased

Seller - If total sales, gross receipts or turnover of the collector from the business exceeds Rs. 10 crores during the financial year immediately preceding the financial year in which such goods are sold

Scope of ‘Goods’

Any goods i.e. any movable property

Goods other than Alcholic liquor for human consumption including IMFL, Tendu leaves, timber, any other forest produce, scrap, coal or lignite or iron ore, motor vehicle of value exceeding Rs. 10 Lakhs

Rate of TDS/TCS

0.1%

0.1%

Amount on which tax to On the amount of purbe deducted/collected chase in excess of Rs. 50 lakhs

On the amount of sale consideration in excess of Rs. 50 lakhs

Time of deduction/collection

At the time of receipt

At the time of credit or payment, whichever is earlier

559

S. 194Q

CH. 30 : TDS ON PAYMENT OF CERTAIN SUM

If both provisions are simultaneously applicable as turnover of both buyer and seller exceed Rs. 10 cr limit in immediately preceding FY as above

Buyer is liable to deduct the tax if the transaction could be subject to both provisions. Seller is not to collect TCS under section 206C(1H)

Seller shall be liable to collect the tax only if the purchaser is not liable to deduct the tax or purchaser failed to deduct tax

Illustration Particulars

Scenario 1

Scenario 2

Scenario 3

Turnover of Seller (In cr.)

11

5

11

Turnover of Buyer 5 (In cr.)

11

11

Sale of goods (In cr.)

1.5

1.5

1.5

Sales consideration paid during the year (In cr.)

1

1

1

Which provision applicable

Only section 206C(1H)

Only section 194Q

Both sections 206C(1H) and 194Q

Who is liable to deduct or collect tax?

Seller liable to collect TCS u/s 206C(1H)

Seller not liable to collect TCS u/s 206C(1H)

Seller not liable to collect TCS u/s 206C(1H)

Buyer not liable to deduct TDS u/s 194Q

Buyer liable to deduct TDS u/s 194Q

Buyer liable to deduct TDS u/s 194Q

0.1%

0.1%

0.1%

Rate of Tax

Amount on which 0.5 (1 cr sales protax to be deducted ceeds received-50 or collected (In Cr.) lakhs threshold limit)

1.0 (1.5 cr minus 50 1.0 (1.5 cr minus 50 lakhs threshold lakhs threshold limit) limit) (TDS by buyer)

Tax to be deducted Rs. 5,000 (TCS by or collected seller)

Rs. 10,000 (TDS by buyer)

Rs. 10,000

Definition of “Goods”

30.1-1 The term ‘goods’ is not defined in the Income-tax Act. The term ‘goods’ is of wide import. Anything which comes to the market can be treated as goods. However, this term ‘Goods’ has been defined under the Sale of Goods Act, 1930 and Central Goods and Services Tax Act, 2017 as under:

S. 194Q

DIV. 2 : TAX DEDUCTION AT SOURCE

560

Sale of Goods Act, 1930 ‘Goods’ means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale” Central Goods and Services Tax Act, 2017 ‘Goods’ means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply”

The Sale of Goods Act, 1930 is a specific statute which deals with the ‘sale of goods’ whereas the CGST Act, 2017 deals with tax on ‘supply of goods’.

Thus, the definition of term ‘goods’ can be referred to from the Sale of Goods Act, 1930 for the purpose of section 194-O. The following pronouncements of the Supreme Court are relevant in interpreting the term “goods”: u

Marketability: To become “goods”, an article must be something which can ordinarily come to the market to be bought and sold. [UOI v. Delhi Cloth & General Mills AIR 1963 SC 791/1963 SCR Suppl. (1) 586] “. . goods ............ should have marketability................. In other words the goods ............ are saleable goods…..” [R.D. Saxena v. Balram Prasad Sharma [2000] 7 SCC 264]

u

Goods may be tangible or intangible: A “goods” may be a tangible property or an intangible one. It would become goods provided it has the attributes thereof having regard to (a) its utility; (b) capable of being bought and sold; and (c) capable of being transmitted, transferred, delivered, stored and possessed. [Tata Consultancy Services v.

State of A.P [2004] 141 Taxman 132 (SC)/BSNL v. UOI [2006] 3 STT 245/152 Taxman 135 (SC)].

The following are some of the illustrations of items that would fall within the scope of the term “goods”: u

Movable property;

u

Any commodity;

u

Shares or Securities [However, transactions in “shares and securities” through recognised stock exchanges exempted from section 194Q by Guidelines issued by CBDT u/s 194Q (CBDT’s Circular No. 13/2021, dated 30-6-2021).]

u

Electricity; [However, transactions in electricity, renewable energy certificates and energy saving certificates exempted from section 194Q by Guidelines issued by CBDT u/s 194Q (CBDT’s Circular No. 13/2021, dated 30-6-2021)]

561

CH. 30 : TDS ON PAYMENT OF CERTAIN SUM

S. 194Q

u

Agriculture produce;

u

Fuel;

u

Motor vehicle;

u

Liquor;

u

Jewellery or bullion;

u

Art or Drawings;

u

Sculptures;

u

Scraps;

u

Canned software (off the shelf computer software)-The Supreme Court in its landmark decision of Tata Consultancy Services v. State of A.P [2004] 141 Taxman 132 (SC) held that Canned software (off the shelf computer software) are ‘goods’.

What payments are liable to TDS under section 194Q 30.2 Section 194Q applies to payment of any sum to a resident seller for purchase of any goods of the value or aggregate of such value exceeding 50,00,000 in any previous year.

It does not matter whether purchase of goods is by way of capital expenditure or by way of revenue expenditure. There is no such exemption in section 194Q from deduction of tax at source from payments for purchase of capital goods.

Income Computation and Disclosure Standards (ICDS), notified under section 145(2) of the Act, is applicable only for computation of income.

ICDSs are not applicable for any other purpose including determining the time of credit of income for deduction of tax at source (TDS).TDS will have to be deducted on the date of credit of sum in books of account or on date of payment irrespective of whether the amount is considered earlier or later for deduction as per the ICDS. The amount of expenditure on which tax has to be deducted is determined by the entry in the books of account and not by the amount for which deduction is allowed under ICDS for computation of income [ICAI’s Tehnical Guide on ICDS].

Section 145A of the Act is relevant only for the purposes of determining income chargeable under the head “Profits and Gains for business or profession”. Section 145A(ii) provides that the valuation of purchase of goods should be adjusted to include the amount of any tax, duty or cess or fee actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition. This adjustment is required only for determining income chargeable under the head “Profits and Gains for business or profession”, not for any other purpose including TDS/TCS.

S. 194Q

DIV. 2 : TAX DEDUCTION AT SOURCE

562

Whether TDS under section 194Q is applicable even where payment is made in kind? Say, shares are allotted to the vender by the company buyer?

30.3 Tax views are possible here: View 1 Section 194Q will apply even where payment is made in kind.

The word ‘purchase’ is not defined in section 194Q of the Act nor is it defined in any of the definitional clauses of section 2 of the Act. Therefore, one has to rely on its plain meaning.

According to P.R. Aiyar’s Advanced Law Lexicon, the plain meaning of ‘purchase’ connotes “buying for a price or equivalent of price by payment in kind or adjustment towards an old debt or for monetary consideration”.

The above plain meaning fits well with the context of section 194Q as the section refers to “paying any sum….for purchase of any goods” and “payment thereof by any mode”. Section 194Q reads: “any person, being a buyer who is responsible for paying any sum …. for purchase of any goods…. , shall, 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, deduct…”

It would be relevant to note the wordings of some other TDS sections and compare and contrast their wordings with section 194Q : 194C “Any person responsible for paying any sum.... shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct...”

194J Any person... who is responsible for paying... any sum by way of shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct....

194LA Any person responsible for paying... any sum... shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct...

Sections 194C, 194J and 194LA refer to “payment... in cash or by issue of a cheque or draft or by any other mode”. The words “any other mode” in sections 194C, 194J and 194LA come after a listing of modes of payment in money and can be interpreted ejusdem generis cash/cheque/draft. “Any

563

CH. 30 : TDS ON PAYMENT OF CERTAIN SUM

S. 194Q

other mode” in these sections can’t be interpreted as payment in kind.

Section 194Q, on the other hand, refers to “payment ..by any mode”.

Thus, it can be said that sections 194C, 194J and 194LA contemplate payments in money only and not in kind while section 194Q contemplates payment by any mode-even in kind.

Thus, it is possible to take a view that purchase of goods paid for by any mode (even in kind) would be covered by section 194Q. VIEW 2 However, an alternative view is possible.

Section 194B, Section 194R(1) and Section 194S have been compared in the Table below: Section 194B : Winnings from lottery or crossword puzzles

Section 194R : Deduction of tax on the benefit or perquisite in respect of business or profession

Section 194S : Payment on transfer of virtual digital asset.

The person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort in an amount exceeding ten thousand rupees shall, at the time of payment thereof, deduct income-tax thereon at the rates in force:

Any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession, by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of ten per cent of the value or aggregate of value of such benefit or perquisite.

194S. (1) Any person responsible for paying to a resident any sum by way of consideration for transfer of a virtual digital asset, shall, at the time of credit of such sum to the account of the resident or at the time of payment of such sum by any mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon:

Provided that in a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has

Provided that in a case where the benefit or perquisite, as the case may be, is wholly in kind or partly in cash and partly in kind but such part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such benefit or perquisite, the person responsible for providing such benefit or perqui-

Provided that in a case where the consideration for transfer of virtual digital asset is–– (a) wholly in kind or in exchange of another virtual digital asset, where there is no part in cash; or (b) partly in cash and partly in kind but the

S. 194Q

DIV. 2 : TAX DEDUCTION AT SOURCE

564

Section 194B : Winnings from lottery or crossword puzzles

Section 194R : Deduction of tax on the benefit or perquisite in respect of business or profession

Section 194S : Payment on transfer of virtual digital asset.

been paid in respect of the winnings

site shall, before releasing the benefit or perquisite, ensure that tax required to be deducted has been paid in respect of the benefit or perquisite

part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such transfer, the person responsible for paying such consideration shall, before releasing the consideration, ensure that tax required to be deducted has been paid in respect of such consideration for the transfer of virtual digital asset.

InCIT v. Hindustan Lever Ltd. [2013] 39 taxmann.com 152, in the context of section 194B, the Karnataka High Court held that the word deduction employed in TDS provisions, postulates are duction or subtraction of an amount from a gross sum to be paid and payment of the net amount thereafter. Where the winnings is wholly in kind subtraction/reduction of any sum therefrom does not arise. In other words, the provisions do not cast any duty/responsibility to deduct the tax at source where the winnings is wholly in kind. If the winnings is wholly in kind, as a matter of fact, there cannot be any deduction of tax at source. The Legislature, therefore, has cast duty/responsibility on such person to ensure that the tax is paid before the winnings is released. The proviso to section 194B makes it further clear that no duty of deduction of tax in respect of the winnings is cast on the person who is responsible for paying, where the winnings is wholly in kind.

Undoubtedly, in that eventuality such person should ensure that the tax has been paid in respect of the winnings before releasing it to the winner.

It can be seen that wherever law intends to cover payment in kind under TDS, it provides a practical mechanism whereby payer has to ensure payee pays the TDS amount before releasing the payment in kind to the payee.

VIEW 2 above seems to be the better view. It is possible to take a view that if payment in kind had been contemplated by section 194Q, there would be a proviso in section 194Q similar to the respective proviso in section 194B/ first proviso in 194R(1)/proviso to section 194S(1).

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Whether adjustment is required to be made for GST for the purposes of deduction of TDS under section 194Q? 30.4 Further question arises whether GST Input Tax credit in respect of GST paid on purchases will have to be included/excluded for computing limit purposes and for TDS purposes?

Besides, CBDT has clarified that “wherever in terms of the agreement or contract between the payer and the payee, the component of ‘GST on services’ comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII- B of the Act on the amount paid or payable without including such ‘GST on services’ component. GST for these purposes shall include Integrated Goods and Services Tax, Central Goods and Services Tax, State Goods and Services Tax and Union Territory Goods and Services Tax. [CBDT’s Circular No. 23/ 2017, dated 19.07.2017].

CBDT has, vide Circular No. 13/2021, dated 30.06.2021, clarified that the above clarification in Circular No. 23/2017 shall apply to TDS under section 194Q, as under: u When tax is deducted at the time of credit of amount in the account

of seller and in terms of the agreement or contract between the buyer and the seller, the component of GST comprised in the amount payable to the seller is indicated separately, tax shall be deducted under section 194Q of the Act on the amount credited without including such GST.

u However, if the tax is deducted on payment basis because the

payment is earlier than the credit, the tax would be deducted on the whole amount as it is not possible to identify that payment with GST component of the amount to be invoiced in future.

Whether adjustment is required in respect of purchase returns while deducting TDS under section 194Q? 30.5 CBDT has, vide Circular No. 13/2021, dated 30.06.2021, clarified as under: u Tax is required to be deducted at the time of payment or credit,

whichever is earlier. Therefore, before purchase return happens, the tax must have already been deducted under section 194Q of the Act on that purchase. If that is the case and against this purchase return the money is refunded by the seller, then this tax deducted may be adjusted against the next purchase against the same seller.

u No adjustment is required if the purchase return is replaced by the

goods by the seller as in that case the purchase on which tax was

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DIV. 2 : TAX DEDUCTION AT SOURCE

566

deducted under section 194Q of the Act has been completed with goods replaced.

Payers, who are covered by section 194Q 30.6 Section 194Q applies to any payer who is a “buyer”. For the purposes of this sub-section, “buyer” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out.

Buyer can be any “person” (individual/HUF/Firm/LLP/company/AOP/ BOI/AJP/co-operative society) whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees in the immediately preceding financial year. If total sales, gross receipts or turnover of a person exceeded Rs.10,00,00,000 during financial year 202122, he will be a “buyer” in relation to purchase of goods from a resident seller during financial year 2022-23.

Payers (“buyers”) who are exempt from liability to deduct TDS u/s 194Q

30.6-1 Central Government is empowered to exempt a person from obligation under this section by notification in the Official Gazette. Such exemption may be made subject to fulfilment of conditions as may be specified in that notification.

If so exempted from section 194Q by the Central Government, “buyer” is not required to deduct TDS under this section.

The sales or gross receipts or turnover from business carried on by the deductor entity must exceed Rs. 10 crore, in order for the deductor entity to fall within the definition of ‘buyer’. His turnover or receipts from nonbusiness activity is not to be counted for this purpose. [CBDT’s Circular No. 13/2021, dated 30.06.2021] Whether ICDS is to be applied in computing turnover or sales or gross receipts limit of Rs. 10 crores

30.6-2 Question arises whether the Income Computation and Disclosure Standards notified under section 145(2) of the Act (ICDSs) is to be applied in computing turnover or sales or gross receipts limit of Rs. 10 crores for deciding whether deductor-entity is liable to deduct TDS? ICDS is not relevant for TDS/TCS as ICDS is meant only for computation of income purposes.

Whether Section 145A of the Act is relevant for computing the turnover limit of Rs. 10 crores of buyer entity?

30.6-3 Section 145A of the Act is relevant only for the purposes of determining income chargeable under the head “Profits and Gains for business

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or profession”. Section 145A(ii) provides that the valuation of sale of goods or services should be adjusted to include the amount of any tax, duty or cess or fee actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition. This adjustment is required only for determining income chargeable under the head “Profits and Gains for business or profession”, not for any other purpose including TDS/TCS. Whether ICDSs or provisions of section 145A(ii) are relevant for computing the threshold limit of purchases of Rs.50,00,000 during a financial year?

30.6-4 No. In view of the reasons in Para 30.6-1 and Para 30.6-2 above, ICDSs or provisions of section 145A(ii) are NOT relevant for computing the threshold limit of purchases of Rs. 50,00,000 during a financial year.

Whether ICDSs are relevant for determining the timing of deducting TDS or amount on which TDS rate is to be applied(tax base)?

30.6-5 ICDS is not applicable for determining the time of credit of income for deduction of tax at source (TDS). TDS will have to be deducted on the date of credit of sum in books of account or on date of payment irrespective of whether the amount is considered earlier or later for deduction as per the ICDS. The amount of expenditure on which tax has to be deducted will be not be the amount for which deduction is allowed under ICDS for computation of income but by the entry in the books of account.

Whether provisions of section 145A(ii) are relevant for determining the amount on which TDS rate is to be applied(tax base)?

30.6-6 No. Whether non-resident can be buyer under section 194Q of the Act?

30.6-7 The provisions of section 194Q of the Act shall not apply to a nonresident whose purchase of goods from seller resident in India is not effectively connected with the permanent establishment of such non-resident in India. For this purpose, “permanent establishment” shall mean to include a fixed place of business through which the business of the enterprise is wholly or partly carries on. [CBDT’s Circular No. 13/2021, dated 30.06.2021] Whether provisions of section 194Q of the Act shall apply to buyer in the year of incorporation?

30.6-8 Under section 194Q of the Act, a buyer is required to have total sales or gross receipts or turnover from the business carried on by him exceeding ten crore rupees during the financial year immediately preceding the financial year in which the purchase of good is carried out. Since this condition would not be satisfied in the year of incorporation, the pro-

TDS

Ready Reckoner AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO NO. OF PAGES BINDING TYPE

: : : : : : :

TAXMANN TAXMANN APRIL 2022 2022 9789356220089 994 PAPERBACK

Rs. : 1995 | USD : 64

Description This book provides a ready referencer for all Sections of tax deducted at source (TDS) and tax collected at source (TCS) of the Income-tax Act. All provisions of TDS and TCS are covered in independent chapters with prominent headings for pinpointed discussions on all aspects of the law and its compliances. The key highlights of this book are as follows: u

Alphabetical TDS Reckoner

u

Your Queries on TDS

u

TDS Charts

u

FAQs on the following: n

Section(s) 194P/194Q & 206C(1H)

n

Deferment of TDS on ESOPs by Start-ups

The Present Publication is the Latest 2022 Edition, authored by Taxmann’s Editorial Board.

It is amended by the Finance Act 2022 and divided into four divisions, namely: u

Introduction

u

Tax Deduction at Source

u

Tax Collection at Source

u

Statement of Financial Transactions

The key features of the book are as follows: u

[Detailed Analysis] of TDS and TCS provisions

u

[Tabular Format] to provide an overview of all provisions of TDS and TCS

u

[Information on all Interconnected Provisions] are provided in a single place

u

[Complete Analysis of the Rules] prescribed in respect of TDS and TCS

u

[Illustrations] for easy understanding of various complex provisions

u

[Guidance on the Controversial Issues] with supporting Case Laws

u

[Circulars and Notifications] are linked with the relevant provisions

u

[Forms] required for meeting compliance requirements

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