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Non applicability of Section 194O (TDS on payment made to E-commerce operator) |
Introduction
The Honourable Finance Minister, Nirmala Sitaraman introduced the varied alternations in existing tax structure of India under the Finance Act, 2020. Some prima facie amendments were brought into effect like the direct tax slab rate, TDS rates, residential status, changes in major section like 44AB, 43CA, 50C etc being implemented from 1st April,2020. In this column of learning we are going to discuss the various amendments in TDS sections. Tax deduction at source is a method of recovering income tax from the assessee in the previous year. This withholds its importance from the various decades guiding government about the various transactions during a year at the side of it serving the revenue purpose.
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Amendments
| section | Nature of payment | Threshold limit for deduction of tax at source | payer | Payee | Revised Rate of TDS | Previous rate of TDS |
| 194 | Payment of dividend by Indian companies | Dividend amount exceeds Rs 5000 during the financial year in any mode i.e., cash or cheque etc. | Indian companies | Shareholders ( resident of India ) | 10 % | 10%(with the monetary limit of Rs 2500) |
| 194 J | Fees for professional or technical services/ royalty/ non compete fees/ director’s remuneration | >Rs 30000 in a financial year, for each category of income. However, this limit does not apply in case of payment made to director of a company. | Any person, other than an individual or HUF; however, in case of fees for professional or technical services paid or credited, individual/ HUF whose total sales, gross receipts or turnover from business or profession exceed the limits specified u/s 44AB in the immediately preceding F.Y. Is liable to deduct tax under 194 J) except where fees for professional services is credited or paid exclusively for his personal purposes. | Any resident | 2 % payee engaged only in the business of operation of call centre and in case of fees for technical services (not being the professional royalty in consideration of sale, distribution or exhibition of cinematographic film).
10% for others. |
2% payee engaged only in the business of operation of call centre.
10 % for others. |
| 194 K | Any amount paid by mutual funds | Any income in respect of
· Units of mutual funds as per section10(23D) · Units from administrator · Units from specified company. Dividend amount exceeding Rs 5000 during F.Y. |
Any person responsible for paying any income in respect of units. | Any resident | 10 % | – |
| 194 O | Payment made by e- commerce operator to the participant | Any payment made by e- commerce to the participant, where the annual amount paid or credited exceeds Rs 5 lakhs. | e- commerce operator | Any participant | 1 % at the time of credit of such amount to the account of the payee or at the time of payment, whichever is earlier. | – |
**NOTE: Section 206AA requires furnishing of PAN by the deductee to the deductor, failing which the deductor has to deduct tax at the higher of the following rates, namely-
- At the rate specified in the relevant provisions of the Income Tax Act, 1961; or
- At the rate or rates in force; or
- At the rate of 20 % (in case of section 194O has been changed to 5% from 20% as per Finance Act 2020).
Non applicability of Section 194O (TDS on payment made to E-commerce operator)
The provisions of this section will not apply to E-commerce participant if he happens to be an individual or HUF and his gross amount of sales or services or both through such e-commerce operator does not exceeds Rs 5 lakhs during a financial year, provided he furnishes PAN or Aadhaar number.
Changes in section 194A/ 194C/ 194H/ 194I/ 194J
Being the other provisions intact, applicability for payer has changed:
- In case of individual or HUF
Having business, whose turnover is more than Rs 1,00,00,000 in a financial year immediately preceding financial year in which such amount is levy for TDS is paid or credited and;
Having professional receipts more than Rs 50, 00,000 in a financial year immediately preceding financial year in which such amount is levy for TDS is paid or credited, is required to deduct TDS.
- In case of cooperative societies
The scope for payment of interest has augmented for the section 194A
If the total sales, gross receipts or turnover of the former crossovers Rs 50 crore during a financial year immediately preceding financial year and the amount of interest paid or to be credited during the financial year exceeds Rs 40000, so in this case the society will be liable to deduct tax at 10% at the time of credit of such amount to the account of the payee or at the time of payment, whichever is earlier.
