Section 194Q – TDS on Purchase of Goods

What is Section 194Q?

A new section 194Q – TDS on purchase of goods has been introduced in the Income Tax Act 1961. This section takes effect from the 1st of July 2021. It applies to any buyer who is responsible for paying any sum to any resident seller for the purchase of any goods of the value or aggregate of value exceeding INR 50 Lakh in any previous year. The buyer at the time of credit of such sum to the account of the seller or at the time of payment, whichever is earlier, is required to deduct an amount equal to 0.1% of such sum exceeding INR 50 Lakh as income tax.

Applicability of Section 194Q – TDS on Purchase of Goods

The TDS on purchase of goods is not 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

Calculation of Threshold of Section 194Q for the Financial Year 2020-21

  • Since section 194Q of the Act mandates buyer to deduct tax on credit of sum in the account of seller or on payment of such sum whichever is earlier, the provision of this sub-section shall not apply on any sum credited or paid before 1st July 2021. If either of the two events had happened before 1st July 2021 , that transaction would not be subjected to the provisions of section 194Q of the Act.
  • Since the threshold of fifty lakh rupees is with respect to the previous year, calculation of sum for triggering TDS under section 194Q shall be computed from 1st April, 2021. Hence, if a person being buyer has already credited or paid fifty lakh rupees or more up to 30th June 2021 to a seller, the TDS under section 194Q shall apply on all credit or payment during the previous year, on or after 1st July 2021, to such seller.

TDS liability u/s 194Q will arise on all purchases booked or paid on or after 1.7 2021. Purchases booked or paid between 1.4.2021 till 30.6.2021 will be considered for determining the threshold purchase limit of Rs. 50,00,000/- in FY 2021-22.

Example

Suppose Mr. A purchases goods worth INR 20 lakhs on 30.5.2021. He purchases goods worth INR 50 lakhs on 1.7.2021. His turnover in the previous financial year 2020-21 was 15 crores.

TDS applicability will be as follows:
Since the turnover of Mr. A in previous FY 2020-21 was in excess of INR 10 Cr & the value of goods purchased by him in current FY 2021-22, exceeds INR 50 Lakhs (20 Lakhs plus 50 Lakhs = 70 Lakhs), so, Mr. A is liable to deduct TDS at 0.1% u/s 194Q of INR 2000 on purchases of INR 20 Lakhs. (70 Lakhs – exemption limit of INR 50 Lakhs).

Purchases of INR 20 Lakhs on 30-5-2021 will be taken into account in determining the threshold limit of INR 50 Lakhs for FY 2021-22 but TDS is to be deducted only on purchases made on or after 1-7-2021.

Suppose if, in the above example, Mr. A had purchased goods worth INR 70 lakhs on 30-6-2021 & INR 40 Lakhs on 1-7-2021, then Mr. A will be liable to deduct TDS at 0.1% of INR 4000, on purchases of INR 40 Lakhs.

FAQs

Can a non-resident be a buyer u/s 194Q?

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.

Is tax supposed to be deducted on advance payment?

Since the provisions apply on payment or credit whichever is earlier, the provisions of section 194Q of the Act shall apply to advance payment made by the buyer to the seller.

TDS deducted but not deposited by deductor

Tax Deducted at Source (TDS) is an indirect method of collecting Income Tax. Payer has to deduct tax at source and also deposit TDS online with the Income Tax Department within a specified due date and file TDS Return. If TDS is deducted but not deposited by deductor, deductor is liable to pay interest and penalties. Therefore, it is very important to file TDS return on time and make payment of TDS before due dates

Due Dates to deposit TDS

Month of Deduction Due date for TDS Payment through Challan

*For Govt Deductor For Other Deductor
April 7th May 7th May
May 7th June 7th June
June 7th July 7th July
July 7th August 7th August
August 7th September 7th September
September 7th October 7th October
October 7th November 7th November
November 7th December 7th December
December 7th January 7th January
January 7th February 7th February
February 7th March 7th March
March 7th April 30th April

*All sums deducted in accordance with the provisions of Chapter XVII-B by an office of the government without challan should deposit the same on the day of deduction. by an office of the Government without challan (Treasury Challan) should be deposited on the same day of deduction.

Income Tax Calendar
Don't miss another Income Tax due date. Check out this amazing tax calendar for 2020 by Quicko.
Explore
Income Tax Calendar
Don't miss another Income Tax due date. Check out this amazing tax calendar for 2020 by Quicko.
Explore

Consequences of non deposit of TDS

In case TDS was deducted but was not deposited by the deductor by the correct date, deductor has to make payment of interest for late deposit of TDS

  • Late filing fee (for late filing the TDS return)
  • Interest (for late deposit of the TDS)
  • Penalty (if deductor does not file TDS return within one year of the due date)

Interest on delayed TDS deposit u/s 201(1A)

Interest is chargeable on short payment/late payment of TDS. There can be the following scenarios:-

Scenario Interest subject to TDS/TCS amount Period for which interest is to be paid
When TDS is not deducted
1% per month or part thereof From the date on which TDS is deductible to the date on which TDS is actually deducted
When TDS is deducted but payment is made lately 1.5% per month or part thereof From the date on which TDS is actually deducted to the date on which such TDS is actually paid

The deductor can make the interest payment on such late payment of TDS before filing TDS returns or demand raised by TRACES.

TDS deducted will not reflect in form 26AS

Form 26AS is an important document which shows the records of how much tax has been deposited by your deductor into the government account. When Individuals and organizations deposit the TDS and file TDS return with the government against your PAN, it automatically shows in your Form 26AS. Payee cannot take a tax credit of the TDS while filing income tax return. If payee takes the tax credit for this amount, they will receive a notice from the income tax department for the mismatch in the TDS claimed and taxes paid.

Therefore, It is better to preserve the proofs in relation to TDS such as payslips, bank account statements, any form of other communication done with the employer in this regard, etc. Also, it is suggested to review the Form 26AS regularly to confirm whether the TDS was deducted or if the deductor has deposited the TDS.

Remedies to deductee under the Income Tax Law

As discussed, deductee should preserve the proofs related to TDS deducted as well as regularly check 26AS on e-filing portal of Income Tax. If deductee is having valid proof about deductor not depositing the TDS, it is best to bring this to his notice before taking further steps. If deductor does not respond even after repeated requests, deductee can take action by filing a written complaint to your assessing officer.

Also, To avoid the delay from companies in depositing TDS and filing returns, the Central Board of Direct Taxes (CBDT) has become more strict and started imposing penalties on companies that are not complying with the rules. Apart from interest on late payment of TDS, penalty of INR 200 per day is applicable till the day on which deductor files the return. Provided that the amount of Penalty will not exceed the number of TDS payable.

Moreover, Assessing officer may direct a person who fails to file the return within the due date to pay a penalty minimum of INR 10,000 which may extend to INR 1,00,000. The penalty under this section is also applicable to the cases of incorrect filing of TDS return. Further, If a person fails to pay TDS to the credit of the Central Government, as required , he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.

FAQs

When can the TDS refund be claimed?

TDS refund can be claimed when
1. The amount of tax which is payable in a year is less than the amount already deducted as TDS.
OR
2. When the income of a person is below the minimum taxable limit and yet TDS has been deducted.

What should I do if deductor has mentioned wrong PAN instead of my correct PAN in TDS return?

Sometimes, the tax deducted from your account may be deposited to an incorrect PAN account by mistake. You can discuss this with deductor and make a request to revise the TDS payment.

Is TDS deductible from the payment made to the Government?

No, TDS is not deductible if person is making payment to the Government.

Latest TDS and TCS Rate Chart for FY 2020-21

TDS Rate Chart

TDS is nothing but an early collection of tax. It needs to be deducted on a specific payment at a prescribed rate by the payer/deductor. Deductor is a person who is liable to deduct TDS before making payment to a deductee. Let’s take a look at the TDS Rates for FY 2020-21. In this article, we take a closer look at the TDS rate chart.

Finance Minister confirms TDS Rates applicable for the coming Financial year in every Budget. During the year 2020, there was Covid-19 induced distress. In order to provide more funds at the disposal of the taxpayers for dealing with the economic situation, the government announced various relief measures on 13 May 2020 through a press release. One of them was a reduction in TDS Rates for FY 2020-21 on non-salaried payments.

The TDS Payments can be divided into 3 sections as TDS on:

  1. Salary Payments
  2. Non-Salary Payments.
  3. Applicable to Non-Residents
TDS Return (24Q) for Salary Payments (Quarterly)
CA Assisted TDS return filing of one quarter for startups, companies and partnership firms making salary payments.
[Rated 4.8 stars by customers like you]
TDS Return (24Q) for Salary Payments (Quarterly)
CA Assisted TDS return filing of one quarter for startups, companies and partnership firms making salary payments.
[Rated 4.8 stars by customers like you]

TDS on Salary Payments

As per Section 192 of the Income-tax Act, the employer needs to deduct TDS on salary payment. Employer/Deductor needs to deposit TDS deducted on salary before the 7th of the next month (30th April for the month of March). The employer has to file TDS Return in FORM 24Q.

Due to Covid-19, the government announced a reduction in TDS Rates on Non-Salaried payments on 13 May 2020.
However, there has been no reduction in the TDS Rate of Section 192 TDS on Salary Payments. Therefore, regular slab rate shall be applicable to the employee based on the slab he/she falls in.
Tip
Due to Covid-19, the government announced a reduction in TDS Rates on Non-Salaried payments on 13 May 2020.
However, there has been no reduction in the TDS Rate of Section 192 TDS on Salary Payments. Therefore, regular slab rate shall be applicable to the employee based on the slab he/she falls in.

TDS on Non-Salary Payments

TDS on payments other than Salary depends upon the nature of Payment. Some common payments which feature the TDS system of taxation include commission, FD interest, rent, etc. TDS on different payments and their applicable rates are notified by the Income Tax Act, 1961. For payments other than salary deductor has to file TDS Return Form 26Q.

TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

In a press release, Finance Minister Nirmala Sitharam as part of the Covid-19 package to revive the economy declared that the TDS rates for all non-salaried payment to residents, and TCS rates will be slashed by 25 percent of the specified rates for the remaining period of FY 2020-21. These rates shall be applicable for the period starting from 14th May 2020 to 31st March 2021.

TDS Rate Chart and sections applicable to Individual/HUF

Given below is the TDS rate chart:

Section

Nature of Payment

Threshold Limit (INR)

Existing Rates

TDS Rates From 14/05/2020    to          31-03-2021

193 Interest on Securities 5000 10% 7.5%
194 Dividend 2500 10% 7.5%
194A Interest other than Interest on Securities 5000 10% 7..5%
194C Payment of contractors and sub-contractors 100000 1% 0.75%
194D Insurance Commission 15000 5% 3.75%
194DA Payment in respect of Life Insurance Policy 100000 1% 0.75%
194EE Payments in respect of
deposits under National
Savings Scheme
2500 10% 7.5%
194F Payments on account
of re-purchase of Units
by Mutual Funds or UTI
20% 15%
194G Commission, prize, etc. on sale of lottery tickets 15000 5% 3.75%
194H Commission or brokerage 15000 5% 3.75%
194-I(a) Rent for Plant and Machinery 240000 2% 1.5%
194-I(b) Rent for immovable property 240000 10% 7.5%
194-IA Payment for acquisition of immovable property 5000000 1% 0.75%
194-IB Payment of Rent 180000 5% 3.75%
194-IC Payment for Joint Development Agreements 10% 7.5%
194J Fee for Professional or
Technical Services
(FTS), Royalty, etc.
30000 2% (FTS, certain
royalties, call
center)
10% (others)
1.5% (FTS, certain
royalties, call
center)
7.5% (others)
194K Payment of Dividend by Mutual Funds 5000 10% 7.5%
194LA Payment of compensation on acquisition of immovable property

250000

10% 7.5%
194LBA(1) Payment of income by business trust  – 10% 7.5%
194LBB(i) Payment of income by investment fund  – 10% 7.5%
194LBC(1) Income by Securitisation Fund  – 25% 18.75%
194M Payment to
commission, brokerage
etc. by Individual/HUF
 – 5% 3.75%
194-O TDS on e-commerce
participants
 –

1%  (w.e.f 01-10-2020)

0.75%

Note: No Reduction in rate of TDS where the tax is required to be deducted at higher rate due to non furnishing of PAN.

TDS Caculator
Is your payment liable for tds? Calculate your TDS liability, rate and due date.
Explore
TDS Caculator
Is your payment liable for tds? Calculate your TDS liability, rate and due date.
Explore

TDS Rate Chart and sections applicable to Others

Section

Nature of Payment

Threshold Limit (INR)

Existing Rates

TDS Rates From 14/05/2020    to          31-03-2021

193 Interest on Securities 5000 10% 7.5%
194 Dividend 2500 10% 7.5%
194A Interest other than Interest on Securities 5000 10% 7..5%
194C Payment of contractors and sub-contractors 100000 2% 1.5%
194D Insurance Commission 15000 5% 3.75%
194DA Payment in respect of Life Insurance Policy 100000 1% 0.75%
194EE Payments in respect of
deposits under National
Savings Scheme
2500 10% 7.5%
194F Payments on account
of re-purchase of Units
by Mutual Funds or UTI
20% 15%
194G Commission, prize, etc. on sale of lottery tickets 15000 5% 3.75%
194H Commission or brokerage 15000 5% 3.75%
194-I(a) Rent for Plant and Machinery 240000 2% 1.5%
194-I(b) Rent for immovable property 240000 10% 7.5%
194-IA Payment for acquisition of immovable property 5000000 1% 0.75%
194-IB Payment of Rent 180000 5% 3.75%
194-IC Payment for Joint Development Agreements 10% 7.5%
194J Fee for Professional or
Technical Services
(FTS), Royalty, etc.
30000 2% (FTS, certain
royalties, call
center)
10% (others)
1.5% (FTS, certain
royalties, call
center)
7.5% (others)
194K Payment of Dividend by Mutual Funds 5000 10% 7.5%
194LA Payment of compensation on acquisition of immovable property

250000

10% 7.5%
194LBA(1) Payment of income by business trust –  10% 7.5%
194LBB(i) Payment of income by investment fund  – 10% 7.5%
194LBC(1) Income by Securitisation Fund  – 30% 22.5%
194M Payment to
commission, brokerage
etc. by Individual/HUF
 – 5% 3.75%
194-O TDS on e-commerce
participants
 –

1%  (w.e.f 01-10-2020)

0.75%

TCS Rate Chart for AY 2020-21 and AY 2021-22

The below table consists of the TCS rate charts from AY 2020-21 and 2021-22. The Finance Minister has made various changes in TDS provisions in the Finance Act, 2020. She also introduced two new sub-section such as section 206C(1G) and 206C(1H) which provides TCS on foreign remittance through Liberalised Remittance Scheme (LRS) and on selling of overseas tour package TDS as well as TCS on sale of goods over a limit.

TCS Rate Chart

Section Particulars TCS Rates  (AY 2020-21) TCS Rates  (Upto 13th May, 2020) TCS Rates (From 14th May, 2020 to 31st March, 2021)
206C(1) Sale of the following:      
  a) Alcoholic Liquor for Human Consumption 1% 1% 1% (No Change)
  b) Tendu leaves 5% 5% 3.75%
  c) Timber obtained under a forest lease 2.5% 2.5% 1.875%
  d) Timber obtained by any mode other than under a forest lease 2.5% 2.5% 1.875%
  e) Any other forest produce not being timber or tendu leaves 2.5% 2.5% 1.875%
  f) Scrap 1% 1% 0.75%
  g) Minerals, being coal or lignite or iron ore 1% 1% 0.75%
206C(1C) Grant of lease or license of the following:      
  a) Parking lot 2% 2% 1.5%
  b) Toll Plaza 2% 2% 1.5%
  c) Mining and quarrying (Other than mining and quarrying of mineral oil, petroleum and natural gas) 2% 2% 1.5%
206C(1F) Sale of the motor vehicle of the value exceeding Rs. 10 lakh whether payment is received by cheque or by any other mode 1% 1% 0.75%
206C(1G)(a) TCS on foreign remittance through Liberalised Remittance Scheme (LRS)

 

(This Section is inserted by Finance Act, 2020 which is proposed to be applicable from 01/10/2020)

(Please refer Note 1 for in depth explanation of this new section)

NA 0.5%: Where
remittance is a repayment of loan obtained for the
purpose of
pursuing any
education.5% In any other
case.(wef 01.10.2020)

 

(10% for non PAN or Aadhaar cases)

(W.e.f. 01/10/2020)

0.5%: Where
remittance is a repayment of loan obtained for the
purpose of
pursuing any
education.5% In any other
case.(wef 01.10.2020)

 

(10% for non PAN or Aadhaar cases)

(W.e.f. 01/10/2020)

206C(1G)(b) TCS on selling of overseas tour package

 

(This Section is inserted by Finance Act, 2020 which is proposed to be applicable from 01/10/2020)

(Please refer Note 2 for in depth explanation of this new section)

NA 5%

 

(10% for non PAN or Aadhaar cases)

(W.e.f. 01/10/2020)

5%

 

(10% for non PAN or Aadhaar cases)

(W.e.f. 01/10/2020)

206C(1H) TCS on sale of any goods [except goods on which TCS applicable as per Section 206C (1), 206C (1F) and 206C (1G)]

 

(This Section is inserted by Finance Act, 2020 which is proposed to be applicable from 01/10/2020)

(Please refer Note 3 for in depth explanation of this new section)

NA 0.10%

 

(1% for non PAN or Aadhaar cases)

(W.e.f. 01/10/2020)

0.075%

 

(1% for non PAN or Aadhaar cases)

(W.e.f. 01/10/2020)

TDS on payments to Non-Resident

Tds u/s 195 is deducted on payments to be made to Non-Resident. There is no threshold limit under section 195 of the Income Tax Act, hence TDS will be deducted from the entire income/amount. TDS shall be deducted at the time of making payment. Form 27Q is required to be submitted on quarterly basis on or before the due date on payments other than salary made to NRI. 

Due to Covid-19, there has been a reduction in TDS Rates. However, there has been no reduction in the TDS Rates of Section 195. Therefore, TDS u/s 195 shall be deducted at the same existing rates.

TDS Return (27Q) for NRI Payments (Quarterly)
CA Assisted TDS return filing for employers, individuals and companies making payments to Non Resident Indian (NRI).
[Rated 4.8 stars by customers like you]
TDS Return (27Q) for NRI Payments (Quarterly)
CA Assisted TDS return filing for employers, individuals and companies making payments to Non Resident Indian (NRI).
[Rated 4.8 stars by customers like you]

FAQs

At what rate the payer will deduct tax if I do not furnish my Permanent Account Number to him?

As per section 206AA​, if you do not furnish your Permanent Account Number to the payer (i.e., deductor), then the deductor shall deduct tax from whichever is the higher of the following, i.e, at the rate of 20%, or the rates specified in the relevant provision of the act or rates in force or the prescribed in the Finance Act.

How can I know the quantum of TDS deducted?

To know the quantum of the tax deducted by the payer, you can ask the payer to furnish you a TDS certificate in respect of tax deducted by him. You can also check Form 26AS​ from your e-filing account on Income Tax Portal.
You can also use the “View Your Tax Credit” facility available at www.incometaxindia.gov.in

What happens if TDS not deducted?

​It is the duty and responsibility of the payer to deduct tax at source. Therefore, if the payer fails to deduct tax at source, penalty is levied for not depositing or not deducting TDS on time. However, the employer can make the interest payment on such late payment of TDS before filing TDS returns or demand raised by TRACES.


TDS on EPF Withdrawal u/s 192A

What is Section 192A?

A new section 192A was inserted by the Finance Act, 2015 regarding TDS on payment of accumulated provident fund balance. The Rate of TDS on EPF withdrawal is 10%. There are two components of the Employee Provident Fund:

  • Employee’s Contribution: Gets Income deduction u/s 80C
  • Employer’s Contribution: Exempt up to 12% of Salary.
  • Interest on EPF: Exempt upto 9.5% p.a

TDS on EPF withdrawal shall be deductible only if the following conditions are satisfied:

  • The amount from EPF has been withdrawn before completion of continuous 5 years of service, and
  • The amount withdrawn is more than INR 50,000.
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Rate of TDS

The Deductor is required to deduct TDS @ 10% on withdrawal of EPF. However, if the employee fails to furnish his Permanent Account Number (PAN), then, the Deductor would deduct TDS at the maximum marginal rate.
The Deductor shall deduct TDS at the time of payment of the Accumulated EPF balance due to the employee.

TDS Calculator
Is your payment liable for TDS? Calculate your TDS liability, rate and due date.
Explore
TDS Calculator
Is your payment liable for TDS? Calculate your TDS liability, rate and due date.
Explore

TDS on EPF withdrawal not deductible

TDS shall not deducted by the trustees of the Employees’ Provident Fund or any person authorized under the scheme under the following circumstances –

  • If the employee has submitted Form 15G/ Form 15H along with the PAN.
  • If there is a termination of employment due to employee’s ill health, completion of the project for which employee was employer, discontinuation of the employer’s business, or any other reason which is beyond the control of the employee.
  • The aggregate amount of EPF withdrawal is less than INR 50,000.
  • The withdrawal has been done after a continuous service of 5 years.
  • In case of a job change, the PF amount is transferred from one account PF account to another.

TDS Return

The Deductor shall deposit TDS with the Government within 7 days from end of the month in which TDS is deducted. However, in the case of TDS deducted for the month of March, the same shall be deposited on or before 30th April. In case of TDS deduction u/s 192A deductor shall file quarterly return in Form 26Q on TRACES within following due dates :

Quarter Due Date for Filing Form 26Q
April-June 31st July
July-September 31st October
October-December 31st January
January-March 31st May
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Quarterly)
CA Assisted TDS return filing for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

FAQs

At what rate will the payer deduct TDS if I do not furnish my PAN to him?

As per section 206AA​, if you do not furnish your Permanent Account Number to the payer (i.e., deductor), then the deductor shall deduct tax at the higher of the following :
1. The Specified rate in the relevant provision of the Act.
2. Rate or rates in force, i.e., the rate prescribed in the Finance Act.
3. At the rate of 20%.​

Where can I show 192A income in ITR?

Employee’s contribution gets an income deduction under section 80C. However, if you have withdrawn money from your EPF account, then you are required to report the same by under ‘Section 10(12) Recognised Provident Fund’ from the drop-down menu. Furthermore, withdrawal from PF account will be tax-exempt only if you have completed 5 years of service.

Section 194N : TDS on Cash Withdrawal

What is Section 194N?

TDS on Cash Withdrawal u/s Section 194N is applicable when the aggregate amount of cash withdrawals are more than Rs 1 crore during a financial year. This section will apply to all the sum of money or an aggregate of sums withdrawn from a particular payer in a financial year. The Government introduce Section 194N in the Union Budget 2019 in order to discourage cash transactions in the country and promote the digital economy.

The budget 2020 has reduced the threshold limit for TDS to Rs 20 lakh for taxpayers who have not filed their income tax returns for past 3 years. Such taxpayers withdrawing cash in excess of Rs 20 lakh but less than Rs 1 crore have to pay 2% as TDS. For withdrawal more than Rs 1 crore TDS @ 5% is required to be deducted .
Tip
The budget 2020 has reduced the threshold limit for TDS to Rs 20 lakh for taxpayers who have not filed their income tax returns for past 3 years. Such taxpayers withdrawing cash in excess of Rs 20 lakh but less than Rs 1 crore have to pay 2% as TDS. For withdrawal more than Rs 1 crore TDS @ 5% is required to be deducted .

Who shall deduct TDS on Cash Withdrawal?

The following payers are shall deduct TDS under this section:

  • Any bank (private or public sector)
  • A co-operative bank
  • A post office

The provisions under section 194N are not applicable in case payment to the following person:

  • Central or State GovernmentBanking Company
  • Co-operative Banks
  • Business correspondents authorised by RBI
  • White label ATM operators
  • Any other person notified by goverment
TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore
TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore

Rate of TDS u/s 194N

The rate of TDS on cash withdrawal u/s 194N is 2% on the amount exceeding Rs. 1 crore. TDS will be deducted when the payment would be made by the Bank, Co-operative society, or Post Office i.e. TDS will be deducted at the time of making the payment. The limit of Rs 1 crore in a financial year is with respect to per bank or post office account and not a taxpayer’s individual account.
For example if cash withdrawn by Mr. Arjun is Rs. 1cr then in that case TDS will not be deducted. Since the amount does not exceed Rs 1cr.

Here is a detail example to help you understand the provision:

XYZ ltd has made the following cash withdrawals for FY 2019-20

  • 85 Lakhs on 25th August 2019
  • 30 Lakhs on 10th September 2019
    There will be two separate calculations:
  1. The threshold limit of Rs. 1 crore
    Aggregate cash withdrawal in a financial year
    85 lakhs + 30 lakhs = 1.15 crore
    Therefore Section 194N will be applicable in this case.

2. Calculation of TDS

The tax deduction would be made for any cash withdrawal exceeding 1 crore after 01 September, 2019.

Transactions Amount (Rs.)
Cash Withdrawal on 25th August 85 Lakhs
Cash Withdrawal on 10th September 30 Lakhs
Total Cash withdrawal in FY 2019-20 1.15 crore
Less: Threshold Limit of 1 crore (1 crore)
Amount eligible for TDS u/s 194N 0.15 crore
TDS @ 2% 30,000

TDS Certificate

Deductors of tax shall quarterly issue a TDS certificate to the deductee in Form 16A for tax deducted at source other than salary. The Deductor can download Form 16A from the account on TRACES. Using Form 16A, the deductee can claim credit of the TDS while filing Income Tax Return.

TDS Return

The Deductor liable to deduct tax under section 194N of the Income Tax Act shall file quarterly return in Form 26Q. The deductor, after filing the Form, should provide Form 16A to the deductee.

Received Form 16A and need help with filing ITR
Let our experts help you
[Rated 4.8 stars by customers like you]
Received Form 16A and need help with filing ITR
Let our experts help you
[Rated 4.8 stars by customers like you]

FAQs

Whether the limit of Rs. 1cr is for single account or for all accounts maintained with a bank?

The limit of Rs. 1cr is overall limit for all accounts (like saving A/c, current A/c etc) maintained by a person with one bank. The limit is per bank rather than per account.

How the TDS under Section 194N will be reflected under Form 26AS?

Form 26AS is a statement for such income on which tax is deducted and deposited to government by deductor. However, cash withdrawal cannot be considered as an income. Therefore, the government has simultaneously amended section 198 of the Income Tax Act wherein it is clarified that cash withdrawal shall not be deemed to be the income of the person.

Section 194LA : TDS on Payments of Compensation on Acquisition of certain Immovable Property

What is Section 194LA?

Section 194LA relates to the TDS provisions applicable on the payment of compensation at the time of acquisition of certain type of immovable property. Any person, who is responsible for paying to a resident, any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land) shall, deduct TDS at the rate of 10%.

TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore
TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore

When to deduct TDS under Section 194LA?

The payer is liable to deduct TDS u/s 194LA if the aggregate amount of payment during the financial year exceeds INR 2,50,000. The payer shall deduct TDS within earlier of the below mentioned dates –

  • At the time of payment of the amount in cash; or
  • At the time of payment of the amount in cheque or draft or any other mode.
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Rate of TDS

  • The Deductor is liable to deduct TDS @ 10% under section 194LA of the Income Tax Act, 1961.
  • No surcharge, education cess or SHEC shall be added to the above rate. Hence, TDS shall be at the basic rate.
  • The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Cases where there is no need to deduct TDS under Section 194LA

TDS is not deductible under section 194LA in following cases when –

  • The person is paying an amount to a ‘non-resident’ person.
  • Aggregate consideration during the Financial Year is less than INR 2,50,000.
  • Payment is in respect of any award / agreement which is exempt from income tax.
  • The payee has filed an application in Form No. 13 to the Assessing Officer and has obtained a certificate for No / lower deduct of tax.
Residential Status Calculator
Taxability in India depends upon Residential Status. Know your Residential status from Resident, NRI or Resident but Not Ordinarily Resident(RNOR)
Explore
Residential Status Calculator
Taxability in India depends upon Residential Status. Know your Residential status from Resident, NRI or Resident but Not Ordinarily Resident(RNOR)
Explore

TDS Certificate

Deductors of tax shall issue TDS certificate to the deductee in Form 16A on Quarterly basis for TDS u/s 194LA. The due dates to issue of TDS certificates is 15 days from due date of filing TDS return. Deductor can download TDS Certificate from TRACES. The certificate shall be given on a quarterly basis. The due dates for receipt of TDS certificates are as below:

TDS For Quarter Due-Date
Q1 April to June 15th August
Q2 July to September 15th November
Q3 October-December 15th February
Q4 January to February 15th June
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

TDS Return

Filing TDS returns is mandatory for all the persons who have deducted TDS. TDS return is to be submitted quarterly and various details need to be furnished like TAN, amount of TDS deducted, type of payment, PAN of deductee, etc. In case of TDS on non salary payments TDS Return Form 26Q is to be filed. Due dates for TDS returns are as follows:

Quarter Due-Date
Q1 31st July
Q2 31st October
Q3 31st January
Q4 31st May

FAQs

What is a compulsory acquisition?

Compulsory acquisition is the power of government to acquire the land from its owner without the willing consent of owner in order to benefit the society.

How can I claim TDS refund?

You need to file a TDS refund claim when the deductor has deducted more tax than the actual liability. You can claim the difference amount by filing an income tax return.

Section 194D : TDS on Insurance Commission

What is Section 194D?

Section 194D covers the provisions relating to deduction of TDS on insurance commission. As per provisions of section 194D, the person who is responsible for making payment to a resident person, as remuneration/ rewards, by the way of commission or for the following purposes:

  • For Soliciting / procuring insurance business; or
  • For the continuance, renewal, or revival of an insurance policy.

TDS is required to be deducted only when the aggregate of the amounts of such income credited or paid or likely to be paid or credited during the financial year exceeds INR 15,000 (Applicable from June 1st 2016).

As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

When is TDS deducted?

The deduction of tax on insurance commission under Section 194D shall be earlier of the following:

  • The credit of commission to the account of the payee(reciever), or
  • The actual payment in cash or cheque or in kind.

There are 2 instances when TDS is not deductible under Section 194D:

  • Commission paid does not exceed INR 15,000
  • Self-declaration under Form 15G/ 15H
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Rate of TDS under Section 194D

If the provisions of section 194D of the Income Tax Act, 1961 is applicable, the Deductor shall deduct TDS at the following rates:

Particulars Rate of TDS
Domestic Company 10%
A Resident person other than Domestic Company 5%

The rate of TDS will be 20% in cases where the deductee has not quoted PAN.

TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore
TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore

TDS Certificate

Deductors of tax shall issue a TDS certificate to the deductee in Form 16A for tax deducted at source other than salary. You can download a certificate from here. The due dates for receipt of TDS certificates are as below:

TDS for the QuarterDue-Date
April-June15th August
July-September15th November
October-December15th February
January-March15th June
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

TDS Return

The Deductor liable to deduct tax under section 193 of the Income Tax Act shall file quarterly return in Form 26Q.

FAQs

What if TDS is not deducted?

The Deductor liable to deduct TDS as per provisions of section 194D fails to deduct the same, then, in such case the Deductor is liable to pay interest @ 1% per month from the date on which tax was deductible till the date TDS actually deducted.

Whether TDS u/s 194D is deductible on commission paid on reinsurance accepted by assessee?

No, TDS is not deductible on commission paid on reinsurance.

Can the payee request the payer not to deduct tax at source and to pay the amount without deduction of tax at source?

A payee can approach to the payer for non-deduction of tax at source but for that they have to furnish a declaration in Form No. 15G/15H.
Form No. 15G is for the individual or a person (other than company or firm) and Form No. 15H is for the senior citizens.

TDS u/s 193 : Interest on Securities

What is Section 193?

TDS on interest on securities is deducted under section 193 of the Income Tax Act. It requires to deduct TDS on interest on securities @ 10%. Let us first understand the meaning of interest on securities. Interest on securities means the interest on:

  • Any security of the Central Government or a State Government
  • Debentures or other securities issued by or on behalf of a local authority or a company or a corporation [established by a Central, State or Provincial Act]
TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore
TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
Explore

Who shall deduct TDS on interest on securities?

The person who is responsible for paying interest on securities to a resident shall deduct the tax component from the interest amount at the time of payment or credit to the account of payee/deductee/receiver whichever is earlier.
TDS mechanism covers Payments made to non-residents. However, tax in such a case is to be deducted as per section 195. Further provisions of section 193 are not applicable to the non-resident.

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Rate of TDS u/s 193

The payer shall deduct tax at the rate of 10% from the sum of interest. However, if the payee does not furnish his Permanent Account Number (PAN), then the payer has to deduct tax at the higher of the following:

  • Rate specified in the relevant provision of the Income-tax Act.
  • The rate or rates in force, i.e., the rate prescribed in the Finance Act.
  • At the rate of 20%.
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Due Date to deposit TDS with Government

Particulars Time Limit to deposit TDS
If the amount is credited in the month of March On or before 30th April
If the amount is credited in the month other than March Within 7 days from the end of the month in which deduction is made.

Penalty on Late Remittance of TDS

  • Penalty u/s 201(1A) for late deduction/late payment of TDS
    • Late Deduction: If TDS has not been deducted then in that case interest will be levied @1% per month or part of a month on the amount of TDS from the date on which tax was deductible to the date of actual deduction
    • Late Payment: If TDS has been deducted but not deposited to the government in such case interest will be charged @1.5% per month or part of a month on the amount of TDS from the date in which TDS was deducted to the date in which TDS was deposited.

No TDS deduction u/s 193 under following cases:

The following are exempt from TDS deduction:

  • A National Defence Bond held by a resident, the rate of interest for which is 4.25%.
  • National Defence Loans availed during the period of 1968 or 1972, at an interest rate of 4.25%.
  • Interest payable on National Defence Loan.
  • Payment of Interest on 7-year National Savings Certificate.
  • Interest payable on debentures issued by a company wherein the public is substantially interested, provided that the sum of interest is confined to Rs 5000; and the company deposits the interest courtesy an account payee cheque (applicable for resident individual, resident or HUF).
  • Overdue interest on any security of the Central Government or State Government if the interest is not above Rs. 10,000 for a financial year [will not be applicable for 8% Savings (Taxable) Bonds, 2003].
  • Payment of Interest on certain notified debentures issued by any institution/authority, public sector company or any co-operative society.
  • Interest payable to certain companies established under the General Insurance Business Act or any other insurer.
  • Interest payable on dematerialized security issued by a company provided that the security is listed on a recognized stock exchange as per the regulations of the Securities Contracts (Regulation) Act, 1956.
  • Interest payable on 6.5% gold bonds, 1977 or 7% gold bonds, 1980 held by a resident individual if the total nominal value of such bonds is limited to a sum of Rs. 10,000 during the period to which the interest relates.
  • Payee, who is not a company or a firm, has issued Form no 15G/15H.
  • The payee is in the custody of a certificate that permits no deduction or less deduction of tax.

TDS Certificate

Deductors of tax shall issue a TDS certificate to the deductee in Form 16A for tax deducted at source other than salary. You can download a certificate from here. The due dates for receipt of TDS certificates are as below:

TDS for the Quarter Due-Date
April-June 15th August
July-September 15th November
October-December 15th February
January-March 15th June
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

TDS Return

The Deductor liable to deduct tax under section 193 of the Income Tax Act shall file quarterly return in Form 26Q within the following due dates:

Quarter Due-Date
April to June 31st July
July to September 31st October
October to December 31st January
January to March 31st May

FAQs

Is it mandatory to file TDS return by deductor?

Yes, the government considers it mandatory for the deductors of tax to specify the details of TDS payments made to the government in the form of a return. In addition TDS returns must be filed on a quarterly basis.

What is the TDS rate if PAN not available?

All transactions liable for TDS will have tax deduction at a higher rate of 20% if the Permanent Account Number (PAN) of the payees is not available.

Whether assessee liable to deduct TDS u/s 193 on provision of interest in case payee is not known?

In a case where a person who is to receive interest cannot be identified at a stage at which provision for ‘interest accrued but not due’ is made. In such case there was no obligation upon the assessee to deduct tax at source. Therefore there could not be any question of levy of penalty and interest under section 201 upon the assessee.

H&R Block customers : Welcome to Quicko

H&R Block is a global online tax filing platform. It started its first Global Technology Center in India in October 2017. They had served the Indian market with various services, some of which have been mentioned below:

  • DIY Tax Filing
  • CA Assisted Tax Filing
  • Informative Youtube videos & Articles

Although they have been involved in the Indian market for a couple of years now, they have decided to discontinue their services to the Indian taxpayers.

If you are an existing customer of H&R Block, you don’t need to worry about your tax preparation for the upcoming Financial Year. You can take the help of Quicko.

Given below are the services that are offered by us at Quicko:

Our DIY – Do It Yourself ITR filing allows you to simply upload your Form 16 on our platform and file your ITR within few minutes. You can also get our CA assistance on the same.

Ask an Expert (Income Tax)
Talk to an expert via call, whatsapp or messages. Ask questions about tax returns, applicability & compliance etc.
[Rated 4.8 stars by customers like you]
Ask an Expert (Income Tax)
Talk to an expert via call, whatsapp or messages. Ask questions about tax returns, applicability & compliance etc.
[Rated 4.8 stars by customers like you]

Our DIY- Do It Yourself TDS filing allows you to fill TDS Return required details like your TAN and PAN and employee’s details on our platform and file TDS Return within few minutes. You can also get our CA assistance on the same.

Ask an Expert (TDS)
Talk to an expert via call, whatsapp or message. Ask questions about TDS Deduction, TDS Return Filing and Compliance.
[Rated 4.8 stars by customers like you]
Ask an Expert (TDS)
Talk to an expert via call, whatsapp or message. Ask questions about TDS Deduction, TDS Return Filing and Compliance.
[Rated 4.8 stars by customers like you]

Our DIY- Do It Yourself GST filing allows you to generate invoices, built purchase orders, keep records, view reports, etc on our platform and file your GSTR within few minutes. You can also get our CA assistance on the same.

Ask an Expert (GST)
Talk to an expert via call, whatsapp or messages. Ask questions about Input Tax Credit, GST Returns, Notices & Compliance etc.
[Rated 4.8 stars by customers like you]
Ask an Expert (GST)
Talk to an expert via call, whatsapp or messages. Ask questions about Input Tax Credit, GST Returns, Notices & Compliance etc.
[Rated 4.8 stars by customers like you]

Taxpayers can avail all these services with our CA assistance. Following are some of the CA assisted plans:

Individuals, in order to file their ITR, have to own a PAN. Therefore without PAN one cannot file their ITR. Even NRIs are required to have their PAN. You can apply for PAN with the help of Quicko and get our CA Assistance on the same.

New PAN Application for Residents
Expert Assisted New PAN (Permanent Account Number) Application for Resident Individuals.
[Rated 4.8 stars by customers like you]
New PAN Application for Residents
Expert Assisted New PAN (Permanent Account Number) Application for Resident Individuals.
[Rated 4.8 stars by customers like you]

Proprietorship businesses and Entrepreneurs who wish to get the status of a company have to register their businesses with the Ministry of Corporate Affairs (MCA). You can apply to register your business with Quicko and get CS Assistance on the same.

Private Limited Company (PLC) Registration
CS Assisted incorporation of Private Limited Company (PLC) in India.
[Rated 4.8 stars by customers like you]
Private Limited Company (PLC) Registration
CS Assisted incorporation of Private Limited Company (PLC) in India.
[Rated 4.8 stars by customers like you]

You can now do Error-free bulk PAN verification with Quicko and get CA Assistance on the same.

  • APIs
    • Provision of GST APIs
      • Simple, RESTFul APIs to verify GSTIN details, create e-invoice, upload GSTR & reconcile ITC.
    • Provision of PAN APIs
      • The easiest way to verify PAN online by using Self-Served REST APIs. Provides seamless customer KYC and error-free payroll.

Apart from that, we also believe in high engagement with customers, being up to date with the trends and providing them with higher customer satisfaction.

Hence, the following are some initiatives taken by us:

We at Quicko are on a mission to simplify taxes for all.

Section 194O : TDS on E-Commerce Sales

What is Section 194O?

Under Budget 2020, a new TDS section 194-O was introduced. With the increase in e-commerce sales, there has been a drastic increase in the number of sellers who sell goods and services through e-commerce platforms. It is important that the sellers pay taxes on such income. Thus, Budget 2020 introduced a new section 194O to deduct TDS on e-commerce sales.

It is mandatory to deduct TDS u/s 194O by the e-Commerce operator on payments made to the e-Commerce seller (Individual/HUF) at the rate of 1% on the gross amount of sales if it exceeds INR 5,00,000 in a Financial Year. Section 194O is applicable from 1st October 2020.

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 5%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 5%

Let us understand Section 194O in detail

Deductor

E-Commerce Operator is a person who owns, manages, and operates a digital platform for the sale of goods and services online. Therefore, e-Commerce Operators should deduct TDS on making payments to e-commerce sellers. Hence, the TDS should be deposited with the income tax department and a TDS Return should be filed.

Deductee

E-Commerce Participant or E-Commerce Seller is a person resident in India who sells goods and services on an e-commerce platform. An E-Commerce Seller receiving payment for goods as well as services sold will receive the amount after the deduction of TDS under Sec 194O. E-Commerce Sellers, not resident in India making e-commerce sales will receive the amount after deduction of TDS under Sec 195

Nature of Payment

E-Commerce Operator is required to deduct TDS on the Gross Sales of goods or services. The Gross Sales includes GST and commission charged by the e-commerce operator.
Further, If the buyer of goods or services has made a direct payment to the e-commerce seller, it shall be deemed that the payment has been made by the e-commerce operator and the amount shall be included in the Gross Sales on which TDS is required to be deducted.

Time of Payment

TDS shall be deducted at the time of credit of the amount to the account of an e-commerce participant or at the time of payment, whichever is earlier.

Rate

If the Deductee is a resident Individual or HUF also the Gross Sales exceed Rs. 5,00,000 in the financial year, deduct TDS u/s 194O at the rate of 1% on Gross Sales. In case of any other deductee, deduct TDS at the rate of 1% on Gross Sales irrespective of the number of gross sales.
If the deductee does not provide the PAN or Aadhar, then TDS shall be deducted at the rate of 5% irrespective of the gross sales amount.

TDS Certificate

Deductor shall issue Form 16A to the deductee as the Tax Credit Certificate of the amount deducted as TDS. Using Form 16A, the deductee can claim credit of the tax deducted while filing Income Tax Return

TDS Return

After depositing TDS with the income tax department, the deductor should file Form 26Q on TRACES to report details of dividend payment. Once the return is filed, the deductor should provide Form 16A to the deductee

Example 1

Rahul is a registered e-commerce seller on Amazon India. For May 2020, here are the details of his sales on Amazon:

  • Total Sales = Rs. 5,90,000
  • GST @ 18% included in the above sales = Rs. 90,000
  • Commission @ 6% charged by Amazon included in above sales = Rs. 35,400
  • Sales from Rahul to Rohan through Amazon. However, Rohan directly made payment to Rahul of Rs. 20,000 (including GST)

Solution

  • E-Commerce Operator – Amazon India
  • E-Commerce Seller – Rahul
  • Gross Sales = Rs. 5,90,000 + Rs. 20,000 = Rs. 6,10,000
  • Since Gross Sales exceeds Rs. 5,00,000 and Rahul is a resident Individual, Amazon India should deduct TDS @ 1% on Gross Sales before making payment to Rahul
  • TDS = 1% of 6,10,000 = Rs. 6,100
  • Payment to Rahul = 6,10,000 – 35,400 – 6,100 = Rs. 5,68,500
  • Amazon would deposit TDS of Rs. 6,100 with the Income Tax Department also file TDS Return Form 26Q
  • If Rahul has not provided PAN or Aadhar, then TDS should be deducted @ 5% irrespective of gross sales amount
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Example 2

ABC Private Limited is a registered e-commerce seller on Amazon India. For May 2020, additionally, here are the details of its sales on Amazon:

  • Total Sales = Rs. 1,18,000
  • GST @ 18% included in the above sales = Rs. 18,000
  • Commission @ 6% charged by Amazon included in above sales = Rs. 7,080
  • Sales from ABC Private Limited to Rohan through Amazon. However, Rohan directly made payment to ABC Private Limited of Rs. 20,000 (including GST)

Solution

  • E-Commerce Operator – Amazon India
  • E-Commerce Seller – ABC Private Limited
  • Gross Sales = Rs. 1,18,000 + Rs. 20,000 = Rs. 1,38,000
  • Amazon India should deduct TDS @ 1% on Gross Sales before making payment to ABC Private Limited. TDS should be deducted irrespective of the sales amount
  • TDS = 1% of 1,38,000 = Rs. 1,380
  • Payment to ABC Private Limited = 1,38,000 – 7,080 – 1,380 = Rs. 1,29,540
  • Amazon would deposit TDS of Rs. 1,380 with the Income Tax Department and file TDS Return Form 26Q
  • If ABC Private Limited has not provided PAN, then TDS should be deducted @ 5%
Ask an Expert of TDS
Having doubts? We are here to help you.
[Rated 4.8 stars by customers like you]
Ask an Expert of TDS
Having doubts? We are here to help you.
[Rated 4.8 stars by customers like you]

FAQs

When is TDS under Sec 194O not required to be deducted by the E-Commerce Operator?

E-Commerce Operator is not required to deduct TDS under Sec 194O if all the following conditions are satisfied:

> The E-Commerce Seller is a resident Individual or resident HUF and
Gross Sales do not exceed INR 5,00,000 and
> E-Commerce Seller has provided their PAN or Aadhaar to the e-commerce operator

Is E-Commerce Operator required to deduct TDS on payment to Non-Resident E-Commerce Seller?

The definition of e-commerce participant as per Sec 194O includes a person resident in India. Thus, E-Commerce Operator is not required to deduct TDS on payment to a Non-Resident E-Commerce Seller under Sec 194O. However, TDS must be deducted under Section 195 as per the prescribed rates.

Whether the TDS is to be deducted for Non-Resident selling well through e-Commerce Portal u/s 194O?

E-commerce Participant is defined a person resident in India selling goods or providing services or both, including digital products, through digital or electronic facility or platform for electronic commerce. And thus No TDS is required to be deducted when Participant is Non Resident.