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.

Section 194B & 194BB – TDS on Lottery, Game Show, Puzzle, Horserace

What is Section 194B & Section 194BB?

If you have income from winning a lottery, crossword puzzle, card game, gambling, betting or horse race, TDS is deducted under Section 194B or 194BB if the income exceeds INR 10,000.

  • Section 194B – Payer should deduct TDS is at 30% on winnings from lottery, crossword puzzles, card games and other similar incomes
  • Section 194BB – Payer should deduct TDS at 30% on horse race income
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%

Incomes under Sec 194B & 194BB

Following are the types of payments as per Section 194B & Section 194BB:

  • Winning from Lottery
  • Crossword Puzzle
  • Races including Horse Race
  • Card Games
  • Gambling
  • Betting
  • Game Shows
  • Any other income of similar nature

When & Who shall deduct TDS u/s 194B & 194BB?

TDS is required to be deducted at the time of payment of the prize. If the payer makes payment in instalments, they must deduct TDS at the time of actual payment of each instalment.

Person liable to distribute the prize for winning from lottery, crossword puzzle, card game, horse race, etc should deduct TDS from the payment and pay the balance amount to the winner. TDS should be deducted only if the winning amount exceeds INR 10,000.

The Deductor should deposit the TDS with the government and file a TDS Return on TRACES.

TDS Rate u/s 194B & 194BB

The payer shall deduct tax at the rate of 30% under Sec 194B from the money paid for winnings from lottery,  crossword puzzle or card game and other similar game if the amount exceeds INR 10,000.

The payer shall deduct tax at the rate of 30% under Section 194BB from the money paid for winnings from a horse race or income from wagering or betting in any racecourse if the amount exceeds INR 10,000.

Due Date to deposit TDS u/s 194B & 194BB

Particulars Time Limit to deposit TDS
If the amount is credited in the month of March
  • On or before 7th April for Government Deductor
  • On or before 30th April for Other Deductor
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

TDS Certificate

Deductor i.e. prize distributor shall issue a TDS Certificate to the deductee i.e. winner in Form 16A for TDS deducted on income from winning a lottery, crossword puzzle, card game, gambling, betting u/s 194B or income from horse race u/s 194BB.

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TDS Return

The Deductor i.e. prize distributor is liable to deduct tax under section 194BB or Sec 194B of Income Tax Act. They 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

Will tax be deducted if I withdraw my winnings on Dream11?

Income on Dream 11 is a betting income. The income tax rate on such income is 31.2% (30% plus 4% cess). If your net winning from a contest exceeds INR 10,000, they would deduct TDS at 30% and credit the remaining amount to your account. You can then withdraw the funds without paying any additional tax.

If the prize is paid in cash or kind, how should TDS be calculated?

The income tax on prize money from winning lottery, puzzles, card games, etc is a flat rate of 30%. For any prize in kind such as car, jewellery, holiday trip, etc you must calculate tax on the market value of the prize. Thus, the payer should deduct TDS at 30% of the aggregate amount of prize in cash and market value of prize in kind.

I have received TDS Certificate for my winnings from playing poker online. How can I claim TDS Credit?

The income tax rate on income from playing online games is a flat rate of 30%. If the winning amount exceeds INR 10,000, the poker platform would deduct TDS at 30%. They would deposit TDS with the government, file TDS Return and issue TDS certificate to the winner. The taxpayer i.e. winner should file ITR, report such income as taxable income and claim the TDS Credit. However, the taxpayer cannot claim any refund of the TDS deducted on such income.

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.

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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
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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
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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.

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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%.

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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.
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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
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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.

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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
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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]
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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.

Section 194 : TDS on Dividend from Equity Shares

What is Section 194?

Under Budget 2020 applicable from 1st April 2020 i.e. FY 2020-21, the Finance Minister abolished Dividend Distribution Tax (DDT). As a result, the dividend received on equity shares and mutual funds which were earlier exempt is now taxable at slab rates. It is taxable in the hands of the shareholder. Since the income would be taxable in the hands of the shareholder, TDS would be applicable. As a result, the Finance Minister made an amendment to the existing Section 194 to add a provision to deduct TDS on Dividend from Equity Shares.

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%

The Company paying a dividend on equity shares should deduct TDS under section 194. The deduction is at 10% on the number of dividends, only if a resident shareholder’s total dividend in a financial year exceeds INR 5,000. Section 194 is applicable from 1st April 2020 i.e. FY 2020-21 onwards.

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%

Section 194 – TDS on Dividend from Equity Shares

  • Deductor
    • The company distributing dividends to the investors of equity shares should deduct TDS on such dividends. The deductor must deposit the TDS and file the TDS Return on TRACES.
  • Deductee
    • Shareholder resident in India earning dividend income on equity shares will receive the amount after TDS under Sec 194. Shareholder resident in India earning dividend income on equity mutual funds will receive the amount after TDS under Section 194K. NRI investors/shareholders, earning dividend income will receive the amount after deduction of TDS under Section 195.
  • Nature of Payment 
    • Sec 194 covers the payment of Dividend on Equity Shares to a resident shareholder exceeding INR 5000 in a financial year.
  • Time of Payment
    • TDS shall be deducted at the time of credit of income to payee account or at the time of payment, whichever is earlier. If the payee of the amount credits the amount to be paid to “suspense account” or any other account, it is considered as ‘deemed payment’ and the payer must deduct TDS on such credit.
  • Rate
    • Deductor should deduct TDS u/s 194 at the rate of 10% if the dividend amount exceeds INR 5000. If the payee does not provide the PAN, TDS shall be deducted at the rate of 20%
  • TDS Certificate
    • Deductor shall issue Form 16A to the deductee as the Tax Credit Certificate of the amount deducted as TDS. The Deductor can download Form 16A from the account on TRACES. 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. The details of the dividend payment are part of this report. The deductor, after filing the report, should provide Form 16A to the deductee.
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

Is TDS required to be deducted on dividend paid to NRI shareholder ?

Section 195 applies to the dividend paid to NRI investors/shareholders, as per provisions of the Income Tax Act. Hence, TDS needs to be deducted on the dividend at 20% on equity shares and equity mutual funds. Therefore, TDS has to be deducted at 10% as per Sec 194 and Sec 194K for an NRI shareholder.

What is Dividend Distribution Tax (DDT) ?

DDT is the tax paid on declaration, distribution or payment of dividend by an Indian Company at the rate of 15%. Since the Indian Company pays DDT, the dividend income is exempt in the hands of the shareholder or investor.
However, the Budget 2020 applicable abolished DDT from 01.04.2020 i.e. FY 2020-21. The dividend is now taxable in the hands of the shareholder or investor. The company is liable to deduct TDS at 10% if the dividend is in excess of INR 5000.

Section 194M : TDS on Payment to Resident

What is Section 194M?

Tax Deducted at Source (TDS) is an indirect method of collecting Income Tax. TDS is based on the principle of “Pay as you earn” which is beneficial for both Government as well as taxpayer.

Further, Tax Deducted at Source (TDS) is a concept where a person making payment of specified nature is liable to deduct tax at a prescribed rate and also deposit the same with the Government. The TDS rates applicable under different sections & subsection are between 1%- 30%.

Further, Individuals and HUFs not liable to deduct TDS u/s 194C, 194H or 194J have to deduct TDS u/s 194M.

Section 194M covers various payments such as the Payment of commission (not being insurance commission), brokerage, contractual fee, the professional fee to a resident person by an individual or a HUF who are not liable to tax audit as per Income Tax Act.

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%

Understanding Section 194M

The Finance Minister announced the introduction of Section 194M, regarding tax deduction at source from any money which an individual or HUF pays to a resident contractor when the services are provided for personal use. Priorly, individuals and HUFs were not liable to deduct TDS for personal or business-related payments.

Hence, in such cases, the books of accounts are to be audited if the turnover of business exceeds 1 Cr. Also, the books of accounts have to be audited even if the total turnover of a profession exceeds 50 Lakhs. This means Section 194M applies to both, personal and business-related payments.

Therefore, individuals and HUFs have to deduct TDS u/s 194C and 194J if the books of accounts have to be audited. Moreover, TDS on commission or brokerage is deducted under section 194H. Furthermore, payments to non-residents are not covered under this section.

The deductors (Individuals & HUF) do not require a TAN (Tax Account Number) to deduct tax u/s 194M. They can do so by quoting their PAN to the government.

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%

Rate of TDS u/s 194M

The TDS is deducted u/s 194M if the turnover of the business or profession exceeds the amount of INR 1 Cr or INR 50 Lakhs respectively in a financial year. The TDS will be deducted at a rate of 5%. TDS will be deducted at a rate of 20% if the deductee does not possess a PAN card.

The CBDT has notified that any sum deducted under section 194M shall be paid to the credit of the Central Government within a period of thirty days from the end of the month in which the deduction is made and shall be accompanied with a challan-cum-statement in Form No. 26QD.

Hence, every person that deducts TDS u/s 194M is responsible to furnish the certificate of deduction of tax at source in Form 16D. TDS certificate has to be furnished to payee within 15 days from due date of furnishing statement in Form 26QD. The individual can download Form 16D from the TRACES portal.

FAQs

What is the time limit on depositing TDS?

The due dates for the payment of the deducted TDS are on or before the 7th of next month. It means if the deductor has deducted tax from payments in the month of July, then he has to pay the TDS on or before the 7th of August.

Who has to deduct TDS u/s 194M?

An individual or HUF, who has to make payment to a resident for a contract work completed or any professional service provided, will have to deduct tax at source u/s 194M.
As per the Union Budget 2019, any individual/HUF paying any sum to a resident, for carrying out any work (including the supply of labor) under any contract or by way of fees for professional services rendered during the financial year, exceeding INR 50,00,000 in a year will have to deduct TDS at the rate of 5%.

What is a tax audit report?

The indirect tax is implied on the income received from financial products. These financial products can be mentioned as:
> Interest received on fixed deposits,
> Incentives from the employer,
> Commission’s payments,
> Dividends on bonds,
> Sale/purchase or rent of any immovable property and money earned as lottery

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%
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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.