Here’s How New TDS Rules Are Going To Impact You From Today

Non-filers of income tax for the previous two financial years would be liable for higher TDS starting from today, i.e. July 1, 2021, under a new income tax regulation. If a taxpayer has tax deductions totalling Rs 50,000 or more in each of the previous two years, such non-filer will be subject to higher tax deducted at source (TDS) and tax collected at source (TCS).

The Central Board of Direct Taxes has built a tool called 'Compliance Check' for Section 206AB & 206CCA to better execute the new TDS rule. In order to reduce the tax deductor's compliance effort, CBDT said in a notification that "To ease this 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)."

For the clarification for use of functionality under section 206AB and 206CCA of the Income-tax Act, 1961, CBDT has also said that "The tax deductor/collector can feed the single PAN (PAN search) or multiple PANs (bulk search) of the deductee/ collectee 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." According to the CBDT, the TDS or TCS rates would be higher for those who have not submitted income tax returns for the past two years.

TDS or TCS shall be levied at double the rate indicated in the relevant section of the Income Tax Act, or at a rate of 5%. The rules of this section will not apply to salary, lottery or crossword winnings, horse racing winnings, trust income, and cash withdrawals. However, a non-resident Indian (NRI) who does not have a permanent establishment in India is excluded from this rule of higher TDS rate or double TDS.

On the other hand, from July 1, the individual (buyer) whose overall sales, gross revenues, or turnover from the company conducted by him or her exceeds Rs 50 lakh will be liable to deduct the tax. Section 194Q of the Finance Act of 2021 authorised the deduction of tax at source (TDS) on payments for the acquisition of goods.

A purchaser who has to pay a resident seller for the acquisition of goods worth more than Rs. 50 lakhs in any previous year must deduct an amount equal to 0.1 per cent of such amount surpassing Rs 50 lakh. According to the official memorandum of Budget 2021 "Tax is required to be deducted by such person if the purchase of goods by him from the seller is of the value or aggregate of such value exceeding fifty lakh rupees in the previous year."

Meanwhile, the Income Tax Department has also issued certain guidelines under section 194Q of Income-tax Act,1961(TDS on purchase of goods), effective from 01.07.2021. Regarding the same the tax department has recently declared via its Twitter handle that "CBDT issues Circular No.13 of 2021 dated 30th June 2021 detailing guidelines under section 194Q of Income-tax Act,1961(TDS on purchase of goods), effective from 01.07.2021." The circular may be downloaded at (https://www.incometaxindia.gov.in/communications/circular/circular_13_2021.pdf).