The Central Board of Direct Taxes (CBDT) on Tuesday released guidelines on tax collected at source (TCS) or tax deducted at source (TDS) on various transactions.
- A new section 194-0 has been inserted in the section 206C (1-I) of the Income-tax Act 1961, wherein from 1 October 2020, an e-commerce operator is mandated to deduct income-tax at the rate of one percent of the gross amount of sale of goods or provision of service or both, facilitated through its digital or electronic facility or platform.
- "This deduction is required to be made at the time of credit of the amount of such sale or service or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant, whichever is earlier," CBDT said.
- A seller receiving more than Rs 50 lakh as consideration for the sale of any goods of the value or aggregate of such value in any previous year is mandated to collect tax from the buyer a sum equal to 0.1 percent of the amount exceeding Rs 50 lakh income-tax. Such a collection is required to be made at the time of receipt of the amount of sales consideration.
- Further, to avoid duplication of taxes on digital payments made at e-commerce websites, the payment gateway will not be required to deduct taxes on a transaction if the tax has been deducted by the e-commerce operator on the same transaction.
Transactions at exchanges
Due to practical difficulties in implementing the provisions of TDS and TCS under section 194-0 and subsection (I H) of section 206C of the Act, in case of certain exchanges and clearing corporations, CBDT said that these provisions will not be applicable on-
- 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;
- transactions in electricity, renewable energy certificates and energy-saving certificates traded through power exchanges registered in accordance with Regulation 21 of the CERC.
TDS on insurance premium
As there is a possibility that there will be no involvement of insurance agents or insurance aggregators in transactions between an insurance company and the buyer after the first year, such an agent/ aggregator will not be liable to deduct tax under section 194-0 of the Act for
those subsequent years. However, the insurance company shall be required to deduct tax on commission payment, if any, made to the insurance agent or insurance aggregator for those subsequent years under the relevant provision of the Act.
Calculation of threshold for the financial year 2020-21
CBDT clarified that:
- Since the threshold of Rs 5 five lakh for an individual/ Hindu undivided family (being e-commerce participant who has furnished his PAN/Aadhaar) is with respect to the previous year, calculation of amount of sale or services or both for triggering deduction under section 194-0 of the Act shall be counted from 1 April 2020.
- Hence, if the gross amount of sale or services or both facilitated during the previous year 2020-21 (including the period up to 30th Sept 2020) in relation to such an individual/HUF exceeds Rs 5 lakh, the provision of section 194-0 shall apply on any sum credited or paid on or after 15 October.
- Since sub-section (1H) of section 206C of the Act applies on receipt of sale consideration, the provision of this sub-section would apply on all sale consideration (including advance received for sale) received on or after 15 October 2020 even if the sale was carried out before 15 October 2020.
- Since the threshold of Rs 50 lakh is with respect to the previous year, calculation of receipt of sale consideration for triggering TCS under sub-section (1 H) of section 206C shall be computed from 15 April 2020. Hence, if a person being seller has already received Rs 50 lakh or more up to 30 September 2020 from a buyer, the TCS under sub-section (1 H) of section 206C shall apply on all receipt of sale consideration during the previous year, on or after 15 October, from such buyer.
TDS on sale of motor vehicle
- The provisions of sub-section (1 F) of section 206C of the Act apply to the sale of a motor vehicle worth over Rs 10 lakh.
- Receipt of sale consideration from a dealer would be subjected to TCS under sub-section (I H)
- of the Act, if such sales are not subjected to TCS under sub-section (1 F) of section 206C of the Act.
- In case of sale to a consumer, receipt of sale consideration of Rs 10 lakh or less to a buyer would be subjected to TCS under sub-section (1 H) of section 206C of the Act, if the receipt of sale consideration for such vehicles during the previous year exceeds Rs 50 lakh during the previous year.
- In case of sale to a consumer, receipt of sale consideration for the sale of a motor vehicle of the value exceeding Rs 10 lakh would not be subjected to TCS under sub-section (lH) of section 206C of the Act if such sales are subjected to TCS under sub-section (IF) of section 206C of the Act.
Adjustment for sale return, discount or indirect taxes
No adjustment on account of sale return or discount or indirect taxes including GST is required to be made for the collection of tax under sub-section (IH) of section 206C of the Act since the collection is made with reference to receipt of the amount of sale consideration.
Fuel supplied to non-resident airlines
CBDT clarified that the provisions of sub-section (1 H) of section 206C of the Act shall not apply on the sale consideration received for fuel supplied to non-resident airlines at airports in India.