Here’s an overview of the rules and guidelines for making declarations regarding the

applicability of Section 194Q and non-imposition of TCS at a higher rate under Sections
206CC & 206CCA of the Income Tax Act, 1961:

1. Section 194Q - TDS on Purchase of Goods

Applicability: Section 194Q mandates that a buyer is required to deduct TDS on the
purchase of goods if:

Their total sales, gross receipts, or turnover exceed ₹10 crore in the previous financial
year.

The purchase value from a particular seller exceeds ₹50 lakh in a financial year.

Rate: TDS should be deducted at 1% on the amount that exceeds ₹50 lakh.

Timing of Deduction: TDS under Section 194Q is deducted at the time of credit to the
seller’s account or payment, whichever is earlier.

Exceptions: If TDS is already deducted under other sections (e.g., 206C(1H)), Section
194Q may not apply. However, if both apply, the buyer should deduct TDS under Section
194Q, and the seller should not apply TCS.

2. Section 206CC - Higher TCS Rate for Non-Furnishing of PAN

Purpose: This section requires sellers to collect TCS at a higher rate if the buyer does
not furnish their Permanent Account Number (PAN).

Higher Rate: The TCS rate for transactions where PAN is not provided will be either
5% or double the standard rate, whichever is higher.

Declaration Requirement: To avoid higher TCS rates under Section 206CC, the buyer
must provide their valid PAN to the seller.

3. Section 206CCA - Higher TCS Rate for Non-Filing of Income Tax Returns

Purpose: This section mandates that a seller should collect TCS at a higher rate from
buyers who:

Are defined as “specified persons,” meaning they have not filed income tax returns for
the past two financial years.

Had aggregate TDS or TCS of ₹50,000 or more in each of those financial years.

Higher Rate: The TCS rate will be the standard rate or 5%, whichever is higher.

Declaration Requirement: To avoid TCS at higher rates, buyers should confirm that
they are compliant with tax filings and not classified as “specified persons” under
Section 206CCA.

4. Declaration Format and Submission Requirements

 Purpose: The declaration verifies that the buyer is compliant with the tax requirements
under Sections 194Q, 206CC, and 206CCA.

Information Required: The buyer should provide:

Confirmation that their turnover exceeds ₹10 crore, if applicable.

Confirmation of TDS/TCS claims in the last two financial years, with acknowledgment
numbers of filed returns.

Declaration of compliance with tax filing requirements to avoid higher TCS rates.

Authorized Signatory: An authorized representative of the buyer must sign and stamp
the declaration.

5. Indemnity Clause

The buyer agrees to indemnify the seller against any loss, interest, or penalty if there is
any misstatement or failure to comply with these declarations.

These sections are intended to ensure compliance and promote transparency in tax
collection and deduction procedures.

Here is a detailed explanation of Sections 194Q, 206CC, and 206CCA of the Income
Tax Act, 1961, including their applicability, rates, conditions, and compliance
requirements:

Section 194Q – TDS on Purchase of Goods

Introduction:

Section 194Q was introduced in the Finance Act, 2021, and became effective from July
1, 2021.

It mandates that a buyer must deduct TDS on certain purchases of goods to bring more
transparency in high-value transactions.

Applicability:

This section applies if:

The buyer’s turnover or gross receipts exceed ₹10 crore in the previous financial
year.

The aggregate value of purchases from a particular seller exceeds ₹50 lakh during a
financial year.

Who is a Buyer?:
 A person whose total sales, gross receipts, or turnover from business exceeds ₹10
crore in the financial year preceding the year of purchase.

Who is excluded?:

TDS is not required if the seller's income is already subject to TDS/TCS under other sections
(e.g., TCS under Section 206C(1H)).

Rate of TDS:

The TDS rate under Section 194Q is 1% on the amount exceeding ₹50 lakh.

Timing of Deduction:

TDS should be deducted at the time of crediting the amount to the seller’s account or
payment, whichever is earlier.

Non-compliance Consequences:

If TDS is not deducted or deposited as required, the buyer may be disallowed the expenditure
deduction equal to 30% of the transaction value in their income tax return.

Section 206CC – Higher TCS Rate for Non-Furnishing of PAN

1. Introduction:

Section 206CC was introduced to ensure higher TCS rates apply when PAN is
not furnished by the buyer.

2. Applicability:

This section applies to transactions where the buyer does not provide PAN.

It’s relevant for any transaction subject to TCS under the Income Tax Act, where
furnishing PAN is mandatory.

3. Higher Rate of TCS:

If the buyer does not furnish PAN, TCS should be collected at either 5% or
double the specified rate under the applicable TCS section, whichever is higher.

4. Requirement for Buyer:

The buyer must provide PAN to avoid a higher TCS rate.

If the buyer fails to provide PAN, they may face higher TCS rates across multiple
transactions.

5. Compliance for Sellers:

Sellers should ensure that PAN is furnished and valid. They should verify PAN
details as per income tax records to avoid issues during tax filing or audit.
Section 206CCA – Higher TCS Rate for Non-Filing of Income Tax Returns

1. Introduction:

Introduced in the Finance Act, 2021, Section 206CCA mandates a higher TCS
rate for buyers who are non-filers of income tax returns.

Effective from July 1, 2021, this section aims to increase tax compliance among
those not regularly filing returns.

2. Applicability:

This section applies to a specified person, defined as:

A buyer who has not filed income tax returns for the previous two
financial years.

The buyer’s aggregate TDS and TCS in each of those two years is
₹50,000 or more.

Exemptions:

This provision does not apply to non-residents who do not have a

permanent establishment in India.

3. Higher Rate of TCS:

TCS should be collected at the standard rate or 5%, whichever is higher, if the
buyer is a specified person.

4. Declaration Requirement:

Buyers should provide their tax compliance status, including income tax return
filing acknowledgment numbers.

The declaration assures the seller that the buyer is compliant with tax filings,
allowing TCS to be collected at standard rates.

5. Compliance and Responsibility:

Sellers must check the compliance status of the buyer. The government’s tax
portal provides tools to check the buyer’s compliance status, helping sellers
comply with Section 206CCA.

Key Differences and Compliance Summary

 Higher Rate Compliance
Section Applicability Rate
Condition Requirement
Buyer’s turnover > ₹10 None, but TDS
Deduct TDS on purchase;
194Q crore and purchase > ₹50 applies if limits are 1%
deduct at credit/payment
lakh crossed.
Buyer has not provided Double the rate or Double or Ensure buyer provides
206CC
PAN 5% 5% PAN
Specified person
Buyer has not filed ITR Standard Verify tax filing status for
206CCA status triggers higher
and TDS/TCS > ₹50,000 or 5% previous two years
rate

Practical Tips for Compliance

1. Declarations: Obtain declarations from buyers regarding their compliance with Sections
206CC and 206CCA to avoid higher TCS rates.
2. Verification: Use the Income Tax Department’s portal to check buyer compliance and
ensure all required documentation is maintained.
3. Documentation: Maintain records of acknowledgments, PAN details, and other
necessary documents to avoid penalties.
4. Periodic Review: Regularly review buyer compliance, especially at the start of each
financial year, to ensure accurate TDS/TCS applications under the latest compliance
status.

These sections are critical for ensuring accurate TDS/TCS compliance, encouraging tax filing,
and preventing tax evasion.

Under Section 194Q of the Income Tax Act, 1961, the buyer is responsible for deducting TDS on
the purchase of goods if the value of the purchase exceeds ₹50 lakh during the financial year.
Here are the key points to note:

1. Threshold Limit: TDS under Section 194Q is applicable if the total purchase value from
a single seller exceeds ₹50 lakh during the financial year.
2. TDS Deductor: The buyer is required to deduct TDS at the rate of 0.1% (or 0.075% for
payments made after 1st July 2021) on the purchase value exceeding ₹50 lakh from the
seller.
3. Seller's Role: The seller does not deduct TDS under this section. It is solely the buyer’s
responsibility to deduct and deposit the TDS.
4. Applicability: This provision applies to all types of goods purchased by the buyer from
the seller.

Example:

 If the total purchase value from a seller exceeds ₹50 lakh in a financial year, the buyer
will deduct TDS at 0.1% on the amount exceeding ₹50 lakh.
 If the total purchase amount is ₹60 lakh, TDS would be deducted on ₹10 lakh (i.e., ₹60
lakh - ₹50 lakh).

The TDS should be deposited to the government and the buyer must issue a TDS certificate to
the seller in Form 16A.

Section 194Q of the Income Tax Act, 1961 was introduced through the Finance Act, 2021, and
it mandates the deduction of TDS by the buyer on the purchase of goods under certain
conditions. Here's the detailed definition of Section 194Q:

Section 194Q – TDS on Purchase of Goods

 Who is required to deduct TDS?

o The buyer of goods is required to deduct tax at source.
o The buyer must be a person or an entity whose total turnover or gross receipts in
the previous financial year exceeds ₹10 crore.
 Threshold Limit:
o TDS under this section is applicable if the aggregate value of purchases of
goods from a seller exceeds ₹50 lakh during the financial year.
o If the buyer purchases goods worth ₹50 lakh or more from the seller, the buyer
must deduct TDS on the value of the purchase exceeding ₹50 lakh.
 Rate of TDS:
o The TDS rate is 0.1% on the value of the purchase exceeding ₹50 lakh.
o However, if the buyer does not have the PAN of the seller, the TDS rate increases
to 5%.
 When is TDS to be deducted?
o TDS is to be deducted at the time of crediting the amount to the seller’s account
or at the time of payment, whichever is earlier.
 Who is liable to deduct TDS?
o The buyer, who purchases goods, is liable to deduct TDS under Section 194Q.
o This applies even if the seller is a non-resident, but the purchase takes place
within India.
 Exemption from TDS:
o Section 194Q does not apply if the purchase value is less than ₹50 lakh or the
buyer’s turnover in the previous year is less than ₹10 crore.
  Seller’s Responsibility:
o The seller does not have any obligation to deduct TDS under this section. The
buyer is solely responsible for the deduction.

Example:

If a business (buyer) purchases goods worth ₹60 lakh from a supplier (seller) during the financial
year, and if the buyer’s turnover exceeds ₹10 crore in the previous financial year, the buyer will
deduct 0.1% TDS on the ₹10 lakh (the amount exceeding ₹50 lakh). This TDS amount will be
₹10,000.

Summary of Key Points:

 Buyer of goods is responsible for TDS.

 Threshold of ₹50 lakh in purchases in a financial year.
 Rate of TDS is 0.1% (5% if PAN is not provided by the seller).
 Deduction is made at the time of payment or crediting the amount, whichever is earlier.

4o mini

You said:

who deduct the tds if previous turnover less than 10 crore but purchase amount more than 50
lakh
ChatGPT said:

ChatGPT

If the buyer’s turnover in the previous financial year is less than ₹10 crore, then Section
194Q does not apply to that buyer, even if the purchase amount exceeds ₹50 lakh.

Explanation:

 Section 194Q mandates TDS deduction on the purchase of goods only when the buyer’s
total turnover or gross receipts in the previous financial year exceeds ₹10 crore.
 If the buyer’s turnover is less than ₹10 crore, the buyer is not required to deduct TDS
under this section, regardless of the purchase amount.

Example Scenario:

 If a buyer's turnover for the previous financial year is ₹8 crore and they make a purchase
of goods worth ₹60 lakh in the current financial year, the buyer is not liable to deduct
TDS under Section 194Q.

In such cases, the buyer does not deduct TDS under Section 194Q, and the responsibility for
TDS would only come into play if other TDS sections (like Section 206C(1H) for the seller's
collection of tax) are applicable.

4o