Examine the applicability of Tax deduction at source (TDS) or Tax collection at source (TCS) as per the Income-tax Act, 1961 for the A.Y 2024-25 in…

CA Intermediate · Taxation · RTP · January 2025
Examine the applicability of Tax deduction at source (TDS) or Tax collection at source (TCS) as per the Income-tax Act, 1961 for the A.Y 2024-25 in the following situations (i) Mr. Arjun, a resident Indian, is in retail business in Delhi and his turnover for F.Y.2022-23 was - 9.90 crores. He regularly purchases goods from another resident, Mr. Saurabh, a wholesaler in Noida. GST rate on such goods is 5%. The aggregate amount of sales made by Mr. Saurabh to Mr. Arjun during the F.Y.2023-24 was 49 lakhs (without GST). Mr Arjun made the payment for consideration of goods (21 lakhs on 8.7.2023,26.25 lakhs on 27.8.2023 and - 4.2 lakhs on 11.3.2024). Mr. Saurabh's turnover for F.Y.2022-23 was - 10.10 crores. (ii) Mr. Raja paid 12 lakhs on 1.11.2023 to M/s. Thomas Cook for a holiday package to Singapore for a week with his family, comprising of his wife and two children, being twins aged 22 years, in the last week of November. Mr. Raja also remitted 10 lakhs on 28.3.2024, out of his personal savings, under LRS through Bank of India, as gift to his sister residing in London, on the occasion of her 50th birthday.

Suggested Answer and Working Notes:

(i) Since Mr. Arjun's turnover for the F.Y. 2022-23 does not exceed 10crores, TDS provisions under section 194Q would not be attracted. However, TCS provisions under section 206C(1H) would be attracted in the hands of Mr. Saurabh since his turnover for the P.Y. 2022-23 exceeds 10crores and his sales consideration (including GST) from Mr. Arjun exceeds 50lakhs. No tax is to be collected under section 206C(1H) on 8.7.2023 and 27.8.2023 since the aggregate receipts till that date i.e.,47.25 lakhs, has not exceeded the threshold limit of 50lakhs. Tax of 145i.e., 0.1% of 1.45 lakhs has to be collected under section 206C(1H) on 11.3.2024 (₹ 4.20 lakhs -2.75 lakhs, being the balance threshold limit) (ii) M/s. Thomas Cook, being a seller of an overseas tour programme package has to collect tax at source under section 206C(1G) from Mr. Raja on receiving amount for purchase of package. For the amount received on or after 1.10.2023, tax has to be collected @5% on upto 7lakhs received and @20% on amount received above 7lakhs. M/s Thomas Cook has to collect tax of 1,35,000, being - 35,000 (5% of 7 lakhs) and 1lakh (20% of 5lakhs). Bank of India, being an authorized dealer has to collect tax at source under section 206C(1G) @20% on amount in excess of 7lakhs remitted under the LRS on or after 1.10.2023 since the remittance of 10lakhs is not for the purpose of education and medical treatment. Bank of India has to collect tax of 60,000 i.e., 20% of 3lakhs, being the amount remitted in excess of 7lakhs.

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

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