Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

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 certificate for deduction at lower rate. Further, sub-section (9) of section 206C of the Act provides that sums on which tax is required to be collected under sub-section (1) or sub-section (1C), are eligible for collection of tax at lower rate.

2. 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.

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

4. 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. Moreover the tax deducted has to be refunded in such cases. It is also stated that there is additional compliance as a seller liable for TCS needs to also verify whether the buyer has deducted tax or not.

5. Therefore, to facilitate ease of doing business and to provide an option to seek a lower deduction certificate so as to reduce 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 the section 206C to bring sub-section (1H) of section 206C in its ambit.

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

[Clauses 65 & 70]

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Full Text:

Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Lower deduction certificate extended to transactions under 194Q and 206C(1H) to reduce overlapping withholding and collection burdens. The proposal amends subsection (1) of section 197 and subsection (9) of section 206C to include the buyer-side withholding provision and the seller-side collection provision within the scope of a lower deduction/collection certificate, allowing taxpayers to seek reduced withholding or collection rates to address blocked funds, refund processes, and overlapping compliance obligations.