Budget 2024: Taxpayers can now get Lower TDS/ TCS Certificate for TDS u/s 194Q/ TCS u/s 206C(1H)

The Budget 2024 was presented by FM Nirmala Sitharaman in the Parliament on 23rd July 2024. Many changes have been proposed by the Finance Minister.

Extending the Scope for Lower Deduction / Collection Certificate of Tax at Source

Section 197 of the Act provides that payments on which tax is required to be deducted under certain sections of Chapter XVII-B are eligible for a certificate for deduction at a lower rate.

Furthermore, sub-section (9) of Section 206C of the Act states that sums on which tax is needed to be collected under sub-section (1) or subsection (1C) are eligible for tax collection at a reduced rate.

Section 194Q of the Act, requires every person being a buyer, who pays to a resident, being the seller, for the purchase of any goods of the value or aggregate of value exceeding fifty lakh rupees in any previous year, to deduct tax at the rate of 0.1% of such sum exceeding fifty lakh rupees.

Furthermore, sub-section (1H) of section 206C of the Act requires every seller who receives any amount as consideration for the sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, subject to the exceptions specified therein, to collect tax at the rate of 0.1% of such consideration exceeding fifty lakh rupees.

Representations have been received that there are instances where the taxpayers are incurring losses and due to tax deducted under section 194Q of the Act, their funds are getting blocked.

In addition, the deducted tax must be refunded in such circumstances. It is also argued that there is additional compliance required because a seller liable for TCS must also verify whether the buyer has deducted tax or not.

Therefore, to facilitate ease of doing business and to provide an option to seek a lower deduction certificate so as to reduce the compliance burden on the assessee, it is proposed:

a) to amend sub-section (1) of section 197 to bring section 194Q in its ambit.

b) to amend sub-section (9) of section 206C to bring sub-section (1H) of section 206C in its ambit.

The amendments will take effect from the 1st day of October 2024.