The Financial Act, 2021 notified the amendment in section 194-IB and also inserted the new Section 194Q which deals with the TDS on payment of rent by certain individuals or HUF and TDS on Purchase Of Goods respectively which will be effective from July 1, 2021.
Section 52 of the Financial Act, 2021 amended the section 194-IB of the Income Tax Act wherein in sub-section (4), for the words, figures and letters “section 206AA, such”, the words, figures and letters “section 206AA or section 206AB, such” shall be substituted with effect from the 1st day of July, 2021.
Section 194-IB of the Income-tax Act, relates to payment of rent by certain individuals or Hindu undivided families.
Sub-section (1) of the said section provides that any person, being an individual or a Hindu undivided family (other than those referred to in the second proviso to section 194I), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct an amount equal to five per cent. of such income as income-tax thereon.
Sub-section (4) of the said section provides that in a case where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.
Sub-section (4) of Section 194-IB was amended so as to insert section 206AB for the purposes of the said sub-section.
The new Section 194Q deals with the TDS On Purchase Of Goods. From 1st July 2021, TDS at 0.1% is applicable on a purchase transaction exceeding Rs.50 Lacs in a year. The responsibility of deduction shall lie only on the buyer whose turnover exceeds Rs. 10 Crore.
The tax shall not be deducted under this provision if the tax is deductible or collectible under any other provision (motor vehicle, jewellery, etc.) except Section 206C (1H).
However, if a transaction is subject to TCS under section 206C(1H), TCS will not be collected and instead TDS under 194Q will be deducted.
Section 194Q reads, any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent. of such sum exceeding fifty lakh rupees as income-tax.
Further, where any sum referred to in sub-section (1) is credited to any account, whether called “suspense account” or by any other name, in the books of account of the person liable to pay such income, such credit of income shall be deemed to be the credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty.
Every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and the person liable to deduct tax.
The provisions of this section shall not apply to a transaction on which tax is deductible under any of the provisions of this Act; and (b) tax is collectible under the provisions of section 206C other than a transaction to which subsection (1H) of section 206C applies.’.
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