Income Tax Department Alert! CBDT issues clarification on TDS, TCS norms applicable from 1st October

The Central Board of Direct Taxes (CBDT) has issued a detailed clarification in regard to the new TDS and TCS norms set to become applicable from tomorrow i.e. 1st October 2020. The CBDT issued clarification through the circular dated 29th September 2020.

Clarifying upon the calculation of threshold for the financial year 2020-21 the CBDT said, "Since the threshold of five lakh rupees for an individual/ Hindu undivided family (being e-commerce participant who has furnished his PAN/Aadhaar) is with respect to the previous year, calculation of amount of sale or services or both for triggering deduction under section 194-0 of the Act shall be counted from 1 April, 2020. Hence, if the gross amount of sale or services or both facilitated during the previous year 2020-21 (including the period up to 30 Sept 2020) in relation to such an individual or Hindu undivided family exceeds five lakh rupees, the provision of section 194-0 shall apply on any sum credited or paid on or after 1 October, 2020."

The CBDT went on to add that since sub-section (1H) of section 206C of the Act applies on receipt of sale consideration, the provision of this subsection shall not apply on any sale consideration received before 15t October 2020. Consequently it would apply on all sale considerations (including advance received for sale) received on or after 15t October 2020 even if the sale was carried out before 1 5t October 2020.

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"Since the threshold of fifty lakh rupees is with respect to the previous year, calculation of receipt of sale consideration for triggering TCS under sub-section (1 H) of section 206C shall be computed from 15t April, 2020. Hence, if a person being seller has already received fifty lakh rupees or more up to 30th September 2020 from a buyer, the TCS under sub-section (1 H) of section 206C shall apply on all receipt of sale consideration during the previous year, on or after 15t October 2020, from such buyer," the CBDT circular read.

Apart from this, three new provisions pertaining to TCS (tax collection at source) have also been brought in via Finance Act 2020. Under the first one, 5 per cent TCS would be applicable on amounts exceeding Rs 7 lakh in a financial year for foreign remittances under the Liberalised Remittance Scheme (LRS) of the RBI. Additionally, a restricted TCS of 0.5 per cent would apply in case of remittances towards loans for pursuing education.

Next, a 5 per cent TCS on purchase of overseas tour packages, irrespective of the value, is applicable under the new norms. Also, TCS at 0.1 per cent on sale of goods of over Rs 50 lakh in a year.