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Friday, July 30, 2021

Business with less than 10-crore turnover need not levy TDS on buys via exchanges

With effect from July 1, 2021, the income tax department has introduced a provision relating to Tax Deducted at Source (TDS), which would be applicable to businesses with turnover of over Rs 10 crore.

By: ENS Economic Bureau | New Delhi |
July 5, 2021 1:29:05 am
companies stock exchange tax decuted at sourceSuch businesses while making any payments for purchase of goods exceeding Rs 50 lakh in a financial year to a resident would be required to deduct a 0.1 per cent TDS. (Representative Image)

Businesses buying shares or commodities traded through recognised stock or commodity exchanges for any value even above Rs 50 lakh will not be required to deduct TDS on the transaction, the income tax department has said.

With effect from July 1, 2021, the income tax department has introduced a provision relating to Tax Deducted at Source (TDS), which would be applicable to businesses with turnover of over Rs 10 crore.

Such businesses while making any payments for purchase of goods exceeding Rs 50 lakh in a financial year to a resident would be required to deduct a 0.1 per cent TDS.

The tax department said it had received representations saying that there are practical difficulties in implementing the provisions of Tax Deduction at Source (TDS) contained in Section 194Q of the I-T Act in case of transaction via certain exchanges and clearing corporations as sometime in these transactions there is no one to one contract between the buyers and the sellers.

“In order to remove such difficulties, it is provided that the provisions of section 194Q of the Act shall not be applicable in relation to transactions in securities and commodities which are traded through recognised stock exchanges or cleared and settled by the recognised clearing corporation,” the CBDT said in its guidelines dated June 30.

Section 194Q relating to TDS deduction by businesses was introduced in the 2021-22 Budget and has come into effect beginning July 1, 2021. The CBDT has also clarified that only those entities having turnover from the business of more than Rs 10 crore in the preceding financial year would be required to deduct TDS at the time of purchase of goods over Rs 50 lakh.

“Buyer is defined to be person whose total sales or gross receipts or turnover from the business carried on by him exceed Rs 10 crore during the financial year immediately preceding the financial year in which the purchase of good is carried out,” it said.

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