The I-T department has introduced a provision relating to Tax Deducted at Source (TDS) from July 1, 2021, which would be applicable to businesses with turnover of over Rs 10 crore.
Such businesses while making any payments for purchase of goods exceeding Rs 50 lakh in a financial year to a resident would be required to deduct a 0.1 percent TDS.
However, this provision would not be applicable on share or commodity transactions done through stock exchanges, the Central Board of Direct Taxes (CBDT) has said.
The CBDT has also clarified that only those entities having turnover from the business of more than Rs 10 crores in the preceding financial year would be required to deduct TDS at the time of purchase of goods over Rs 50 lakh.
Buyer is defined to be person whose total sales or gross receipts or turnover from the business carried on by him exceed Rs 10 crore during the financial year immediately preceding the financial year in which the purchase of good is carried out, it said.
This new change will tighten the grip on manufacturing and trading communities, mandating them to indicate correct numbers in tax filings, leading to a surge in tax collections in the long run, Mohan added.
He said that the CBDT has clarified that these TDS provisions do not apply to a buyer who does not have a business activity, irrespective of the turnover or receipts from non-business activity.
Commenting on the guidelines, Nangia Andersen LLP said CBDT has clarified that since the provisions mandate the buyer to deduct tax on earlier of ‘credit’ or ‘payment’, if either of the two events happen before July 1, 2021, the transaction would not be subject to TDS.
