The Central Board of Direct Taxes (CBDT) notified that the 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 with effect from July 1, 2021
A provision relating to Tax Deducted at Source (TDS) would be applicable to businesses with turnover of over Rs 10 crore.
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 crores in the preceding financial year would be required to deduct TDS at the time of purchase of goods over Rs 50 lakh.
The Income Tax Department has received representations stating that there are practical difficulties in implementing the provisions of Tax Deduction at Source (TDS) contained in Section 194Q 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.
The CBDT said that 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. However, this provision would not be applicable on share or commodity transactions done through stock exchanges.
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