Briefly discuss the provisions of tax deduction/collection at source under the Income-tax Act, 1961 and determine the amount, if any, of TDS and TCS…

CA Intermediate · Taxation · MTP · May 2024
Briefly discuss the provisions of tax deduction/collection at source under the Income-tax Act, 1961 and determine the amount, if any, of TDS and TCS in respect of the following payments: (i) Mr. Harish bought an overseas tour programme package for Switzerland for himself and his family of 10 lakhs on 01-11-2023 from an agent who is engaged in organising foreign tours in course of his business. He made the payment by an account payee cheque and provided the permanent account number to the seller. (ii) Mr. Aditya pays - 55,00,000 during F.Y. 2023-24 to Mr. Naresh, for supply of labour, for carrying out the construction work of his factory. During the P.Y. 2022-23, Mr. Aditya's turnover was 95 lakhs.

Suggested Answer and Working Notes:

TDS implications (i) Since overseas tour package is taken on or after 1.10.2023, tax @ 5% till 7 lakhs and 20% thereafter, is required to be collected u/s 206C(1G) by the seller of an overseas tour programme package, from Mr. Harish, being the buyer of an overseas tour package, even if payment is made by account payee cheque. Accordingly, tax has to be collected@5% on 7 lakh and 20% on 3 lakhs. TCS = 95,000 (ii) Mr. Aditya has to deduct tax at source@5% u/s 194M, although his turnover for the P.Y. 2022-23 does not exceed 1crore and he is not liable to deduct tax at source under section 194C, since the payment to contractor, Mr. Naresh, exceeds 50lakhs. Accordingly, tax has to be deducted @5% on 55 lakhs. TDS = 2,75,000

Topics: Paper 3A: Income Tax Laws, Paper 3B: Goods and Services Tax

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