Examine & explain the TDS/ TCS implications in the following cases along with reasons thereof, assuming that the deductees are residents and…

CA Intermediate · Taxation · MTP · September 2025
Examine & explain the TDS/ TCS implications in the following cases along with reasons thereof, assuming that the deductees are residents and having a PAN which they have duly furnished to the respective deductors. (i) Mr. Ram, an individual carrying on business, reported a turnover of 89 lakhs for the F.Y. 2023-24. In April 2024, he entered into an agreement to hire machinery for use in his business operations for a monthly rent of 50,000. (ii) XYZ Limited, having an idle parking lot, opted to lease it through a public bidding process. PQR Ltd, a PSU, emerged as the highest bidder and will utilize the premises for its business operations under the lease arrangement.

Suggested Answer and Working Notes:

(i) The provisions of section 194-I are not applicable in this case since Mr. Ram's turnover from business does not exceed 1crore in the P.Y. 2023-24. Further, Mr. Ram is not required to deduct tax at source under section 194-IB since Mr. Ram has paid rent for hiring of machinery for his business operation and section 194-IB covers only rent on land or building or both. Accordingly, Mr. Ram is not required to deduct tax at source on rent paid for hiring machinery for his business purpose. (ii) Section 206C(1C) requires to collect tax by every person who grants a lease or a licence or enters into a contract or otherwise transfers any right or interest in any parking lot to another person (other than a public sector company) for the use of such parking lot for the purposes of business. The tax under section 206C(1C) shall be collected at the rate of 2%. In the present case, since PQR Ltd. is a public sector company, M/s XYZ Ltd. is not required to collect tax at source under section 206C(1C).

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

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