The Central Board of Direct Taxes (CBDT) on September 29 issued a detailed clarification pertaining to the new TDS/TCS provisions set to be applicable from October 1, 2020, onward.
The Finance Act, 2020, widens the scope of TCS provisions to cover the sale of goods, sale of overseas tour packages and overseas remittance of funds under the Reserve Bank of India's (RBI) Liberalised Remittance Scheme (LRS). It also introduced a new provision under section 194-O, relating to the tax liability of e-commerce operators. The new norm mandates e-commerce operators to deduct TDS at 1 percent in respect of the amount of any sale of goods and services.
The CBDt has issued a detailed list regarding the applicability of the new TDS/TCS provisions. Regarding the calculation of threshold for the financial year 2020-21, the tax body clarified:
- 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.
- Since sub-section (1H) of section 206C of the Act applies on receipt of sale consideration, the provision of this sub-section shall not apply on any sale consideration received before 1 October 2020.
- 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 1 April, 2020.
Three new provisions pertaining to tax collected at source (TCS) have also been brought in via the Act. Under the first one, 5 percent 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 percent would apply in case of remittances towards loans for pursuing education.
Next, a 5 percent TCS on purchase of overseas tour packages, irrespective of the value, is applicable under the new norms. Also, TCS at 0.1 percent on sale of goods of over Rs 50 lakh in a year.
Under the new rules, companies are required to file returns by the following month's 10th day.