Central Board of Direct Taxes (CBDT) has issued Press Release dated 30th September, 2020 to further clarify on doubts arising on account of new TCS provisions under Income Tax Act, 1961.
Key points of the Press Release are:
a. It has been clarified that, the TCS shall be applicable only on the amount received on or after 1st October, 2020. It has been explained through an example, a seller who has received Rs.1 crore before 1st October, 2020 from a particular buyer and receives Rs. 5 lakh after 1st October, 2020 would be required to collect tax on Rs. 5 lakh only and not on Rs. 55 lakh [i.e Rs.1.05 crore – Rs. 50 lakh (threshold)] by including the amount received before 1st October, 2020.
b. It has also been clarified that seller of goods shall collect tax @ 0.1 per cent (0.075% up to 31.03.2021) if the receipt of sale consideration from a buyer exceeds Rs. 50 lakh in the financial year.
c. Further, since the seller in most of the cases maintains running account of the buyer in which payments are generally not linked with a particular sale invoice, in order to simplify and ease the compliance of the collector, it has been clarified that this TCS provision shall be applicable on the amount of all sale consideration received on or after 1st October, 2020 without making any adjustment for the amount received in respect of sales made before 1st October, 2020.
d. TCS is not an additional tax but is in the nature of advance income-tax for which the buyer would get the credit against his actual income tax liability and if the amount of TCS is more than his tax liability, the buyer would be entitled for refund of the excess amount along with interest.
e. This TCS shall be applicable only on the receipt exceeding Rs. 50 lakh by a seller from a particular buyer. Therefore, on payment of Rs. 1 crore made by a buyer to a particular seller only Rs.5,000 (Rs. 3,750 this year) i.e. [0.1% of (Rs. 1 crore – Rs. 50 lakh)] shall be collected. Hence, in case of a person making payment of Rs.1 crore each to 10 different sellers, the total tax collected shall be only Rs.50,000 (Rs. 37,500 this year) i.e 10 x [0.1% of (Rs. 1 crore- Rs. 50 lakh)] on the total payment made for purchase of Rs. 10 crore to ten different sellers.
For further details, please refer to the attached document.
Source: Central Board of Direct Taxes (CBDT)
