By CA Gauri Chadha
Tax collected at source ( TCS ) & Tax deducted at source(TDS) on the various transaction has changed from 1st October 2020. The New Finance Act 2020 widened the scope of these taxes covering foreign remittances, e-commerce, insurance and sale /purchases made of more than Rs 50 lakh. Let’s have a look as to how will this impact your wallet.
1. E-Commerce
To bring e-commerce into a structured tax net, the finance act has inserted a new section 194-O. An e-commerce entity will deduct 1% of TDS on gross sale of good and services or both which is facilitated through their digital or electronic mode of payment. In this case, the payment gateway will not be required to deduct tax under this section if the tax has been deducted by e-commerce operator on the same transaction.
2. Insurance Premium
Under the new section 194-O if there is no involvement of an insurance agent or aggregator in the transaction between an insurance company and the buyer, then there is no need to deduct TDS. However, the insurance company will have to cut TDS on commission payment if it is made to them in subsequent years.
3. Big purchases will attract a TCS of 0.1%
Another section 206C (1H) has also been inserted according to which any seller will collect 0.1 % of tax (0.75 till 31st March 2021) from the buyer if the sale consideration exceeds 50 lakh or if aggregate sale value exceeding Rs 50 lakhs in any previous year. This is applicable only if the turnover of the assessee is more than Rs 10 crores in the previous financial year. Moreover, such provision shall be applicable only for transactions made after 1st Oct. Eg if a seller receives 60 lakh before 1st October and 1 lakh after 1st October he will collect TCS on 1 lakh and not 11lakh.
4. On cars
Buying an expensive car would be a bit more expensive. If the cost of the car crosses Rs 10 lakh, then the buyer will have to pay a 1% TCS. If the sale is made to a dealer, then section 206C(IH) would apply, and the threshold will increase to Rs 50 lakh.
5. Tax on Foreign Fund transfer
If you are sending money abroad, then you should know that a foreign remittance exceeding Rs 7 lakh will attract a TCS of 5%. This could rise to 10% in cases where PAN or Aadhar is not available. In case of fees paid to a foreign college/institute through an education loan a reduced TDS of 0.5% will be charged .
6. Overseas Tour packages will be dearer
The seller of overseas tour packages will be now collecting a 5% tax on the total cost of the travel. There is no threshold limit on this so whether your tour package is of Rs 1 lakh or Rs 5 lakh you will have to shell out 5% more on the cost of the travel. TCS will not be applicable if you book your foreign travel yourself instead of going through a travel agency.
Exemption from 194-O
-Any individual or HUF who does not cross 5 lakh threshold and furnishes PAN /Aadhaar shall not come under the purview of this section.
-TCS provisions will not apply to transactions traded through recognized stock exchanges or cleared and settled by recognized clearing corporation.
-It would also not apply to transactions in electricity renewable energy certificates and energy-saving certificates traded through power exchanges.
It has been clarified by CBDT that no adjustment of sales return, discount, or GST will be made since the collection is made with reference to receipt of the amount of sale consideration.
