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CBDT: TDS relevant on buyer-seller transactions above Rs 50 lakh after July 1, 2021

The Central Board of Direct Taxes (CBDT) Wednesday clarified that consumers would wish to deduct tax at supply at 0.1% of quantity exceeding Rs 50 lakh when paid or credited to a resident vendor on transactions after July 1, 2021, beneath part 194Q of the earnings tax Act which comes into impact from July 1.

The Board has clarified that threshold of Rs 50 lakh for triggering TDS shall be computed from April 1, 2021 and GST element should be segregated on the time of credit score.

The Board has additional clarified that if a transaction attracts TDS beneath each 194O, relevant on e-commerce operators, and 194Q of the Act, the deduction shall need to be made beneath 194O.

Additional, the place there’s a conflict between TDS and provisions of tax collected at supply () on sale of products beneath 206C(1H), TDS provisions shall prevail.

“Addressing the open points, the round is simply in time and accords a lot wanted readability on the subject material, because the compliance framework turns into efficient tomorrow,” stated Neha Malhotra, director at Nangia Andersen LLP.

Part 194Q gives that each purchaser who’s liable for paying any sum to a resident vendor, for buy of any items of the worth or combination of worth exceeding Rs 50 lakh rupees in any earlier yr, shall on the time of credit score of such sum to the account of the vendor or on the time of fee, whichever is earlier, deduct an quantity equal to 0.1 % of such sum exceeding Rs 50 lakh as earnings tax.

In line with a round issued by the Board Wednesday, purchaser has been outlined as an individual whose complete gross sales or gross receipts or turnover from the enterprise carried on by him exceed Rs 10 crore throughout the monetary yr instantly previous the monetary yr by which the acquisition of excellent is carried out.

The round highlighted that when tax is deducted on the time of ‘credit score’, TDS beneath 194Q shall be deducted on quantity credited with out together with the GST element, but when tax is deducted on fee foundation then TDS must be deducted on the entire quantity since it will not be doable to establish the GST element.

Moreover, it has been clarified that whereas the brand new provisions shall apply on advance fee, the identical shall not be relevant to a non-resident whose buy of products is just not linked with everlasting institution (PE) of such non-resident in India.

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