Wednesday, February 21, 2024

Income Tax Department gave big relief! No need to deduct TDS on the purchase of shares above Rs 50 lakh

TDS on Shares and Commodities: The Income Tax Department has said that businesses buying shares or commodities of any value through a recognized stock exchange or commodity exchange will not be required to deduct TDS on the transaction, even if their value is 50%. be more than Rs. 

The new provisions came into effect on July 1

The Income Tax Department has implemented a new provision for Tax Deducted at Source (TDS) with effect from July 1, 2021, which will be applicable to businesses with a turnover of Rs 10 crore. Such businesses will have to deduct 0.1% TDS while making payments to a resident for the purchase of goods worth more than Rs 50 lakh in a financial year. However, the CBDT has clarified that this provision will not apply to the transaction of shares or commodities through any stock exchange.

Difficult to apply these rules in the case of shares

The tax department said that they had received several representations in this regard that there are practical difficulties in applying the provisions of TDS included in section 194Q of the IT Act in case of transactions through certain exchanges and clearing corporations, as such There is no one-to-one contract between buyers and sellers in transactions. 

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The CBDT, in its guidelines issued on June 30, has said that in order to remove these difficulties, it has been decided that the provisions of section 194Q of the Income Tax Act will not apply to transactions of shares and commodities, which are recognized Bought through stock exchanges or settled and cleared through a recognized clearinghouse. 

The strictness of IT department

Let us tell you that Section 194Q related to deduction of TDS on behalf of businesses was introduced in the budget of 2021-22 and it has come into force from July 1, 2021. The CBDT also clarified that only those entities whose annual turnover from business in the last financial year exceeds Rs 10 crore will be required to deduct TDS on purchases exceeding Rs 50 lakh. 

What do experts say?

AMRG & Associates Senior Partner Rajat Mohan said that the transaction in goods was captured only in the GSTN system, as the IT laws have never taken into account the transaction data relating to the purchase/sale of goods. Now with these new TDS provisions, the income tax system will also capture the sales data related to the transactions of goods on a monthly basis. This new rule will tighten its grip on manufacturing and trading communities, directing them to submit accurate tax filing data, which will also increase tax collection. 

Rajat Mohan said that it has been clarified by CBDT that these TDS provisions do not apply to a buyer who does not have business activity, irrespective of turnover or receipts from non-business activity. In this way, households are kept out of TDS deduction, irrespective of the value of non-business financial transactions they have done. Nangia Andersen LLP says that as per the CBDT, the provisions direct the buyer to deduct tax before credit or payment, if either of these is done before July 1, 2021, then TDS will not be deducted on this transaction. Also, the limit of Rs 50 lakh for TDS will be calculated from April 1, 2021. 

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