What is the new TCS provision under section 206C (1H) of the Income Tax Act?

The government has introduced a new section 206C (1H) through Finance Act 2020 to extend the TCS provisions to the seller of goods. As per this provision, a seller whose turnover is above Rs 10 crore is required to collect tax, when he receives more than Rs 50 lakh from one buyer during a financial year. It is to be noted that the TCS should be collected at the time of receipt of the amount.

Points to note:

  1. This provision applies only to a seller whose gross turnover exceeds Rs.10 crore during the financial year preceding the FY in which such sale is carried out.
  2. Goods do not include exports and goods covered under section 206C(1)- TCS on sale of alcohol, tendu leaves, forest produce and scrap; 206C(1F)- TCS on sale of motor vehicles and 206C(1G)- TCS on foreign remittance.
  3. TCS is not required to be deducted if the buyer is a Central/State Government, Embassy, High Commission, Legation, Consulate, Trade Representation of Foreign State or any local authority.
  4. If the buyer is required to deduct TDS under any other provisions of the Income Tax Act on the goods purchased by him from the seller and has deducted such amount, then the seller is not required to collect TCS on such transactions.
  5. This provision does not apply to the import of goods to India.

Calculation of TCS and effective dates:

This provision is applicable from 1st October 2020. A seller is required to collect tax at source at 0.1% on receipt of consideration of value exceeding Rs.50 lakh in a financial year from the buyer. (This rate is reduced to 0.075% till 31st March 2021 due to COVID-19).

Also, the threshold of Rs.50 lakh is for the whole financial year. Thus, if the seller receives any sale consideration from the buyer from 1st April 2020 to 30th September 2020, the same will be considered for calculating the limit of Rs.50 lakh for that buyer.

The Major changes in ITR Forms for AY 2022-23

  1. The Key changes are as follows : 1. Schedule- FA( Foreign Asset) : From Accounting Year to Calendar year [ITR 2, 3, 5 & 6].
    The new ITR Forms have replaced the expression “accounting period” with “calendar year ending as on 31st December 2021 meaning thereby the assessee shall furnish the details of all foreign assets held between 01-01-2021 and 31-12-2021 in return to be filed for the assessment year 2022-23.
  2. Schedule of Capital Gains : Additional disclosures [ITR 2, 3, 5 & 6]
    A. Date of purchase and sale of land/building.

    If there is any income arising from the transfer of land or building is taxable under the head of ‘Capital Gains’.  It will be mandatory to furnish the date of purchase and date of sale of such land or building in the ITR.

B. Year-wise details of the cost of improvement to land/building:
It is required to give year-wise details of the cost of improvement (if any) incurred on the land/building transferred during the relevant year. The new ITR forms ask Cost of improvement; Year of improvement; and Cost of improvement with indexation.
C. Disclosure of Fair Market Value (FMV) of capital assets and     consideration received in a slump sale transaction:
As per amended provision of section 50B  vide  Finance Act 2021 in case of a slump sale, the Fair Market Value (FMV) of undertaking or division transferred shall be deemed as the full value of the consideration received or accruing as a result of the transfer of such capital asset.

D. Separate disclosure of cost of acquisition and indexed cost of acquisition:
Earlier the assessee was required to disclose only the indexed cost of acquisition of property transferred. Now as per new ITR Forms assesse required to mention both the ‘cost of acquisition’ and the ‘indexed cost of acquisition’

3. Schedule-OS (Other Sources).: Dividend income taxable as per section 2(22)(e) [ITR 2, 3, 5 & 6].
As per New ITR, separate disclosure is required for deemed Dividend U/s 2(22)( e) of Income Tax Act 1961

4. general Information: Nature of employment for pensioners [ITR 1 & 4].
An individual receiving pension had to choose the option of ‘Pensioners’ in Part A general Information,
Now ITR provide following option

1. Pensioners – CG,

2. Pensioners – SC,

3. Pensioners – PSU and

4. Pensioners – Others.

5. General: residential Status: More selection criteria provided to choose. [ ITR 2&3].

New ITR forms give a suitable description of different clauses due to which the residential status is determined. The assessee has to choose the relevant option in support of his selection of a residential status.

6. Audit Information: Additional information sought from the assessee not opting for the presumptive tax scheme [ ITR 3,5 &6]
in new ITR Form The following additional disclosures are required regarding Audit Information:

Whether total sales, turnover or gross receipt is between Rs. 1 crore and Rs. 10 crores. If not, is it below Rs. 1 crore or exceeds Rs. 10 crores?

The new ITR forms require aggregation of receipts and payment in cash and non-account payee cheque or DD while computing the limit of 5% as mentioned above.

Section 89A of the Income Tax Act

Following section 89A shall be inserted after section 89 by the Finance Act, 2021, w.e.f. 1-4-2022 :

Relief from taxation in income from retirement benefit account maintained in a notified country.

What is Section 89A

CBDT has inserted a new section 89A vide the Finance Act, 2021 to provide relief to residents who have income from foreign retirement benefits accounts.

Income from such foreign retirement benefits accounts is taxable in some countries on a receipt basis. However, the amount withdrawn from such an account is taxable in India on an accrual basis. Hence, the taxpayers are facing difficulties in claiming the foreign tax credit due to the mismatch in taxability for the particular year.

Section 89A provides that the income of a specified person from the specified account shall be taxed in the manner and in the year as prescribed by the Central Government. A specified person means a resident person who opened a specified account in a notified country while being a non-resident and resident in that country.

Countries Notified for section 89A

For this CBDT notifies 4 countries : Canada, United Kingdom of Great Britain, Northern Ireland and United States of America under section 89A of the Income-tax Act, 1961 vide Notification No. 25/2022- Income Tax Dated: 4th April, 2022.

New Rule 21AAA: Income-tax (6th Amendment) Rules, 2022

The Central Board of Direct Taxes (CBDT) on March 26, 2021, has issued the Income-tax (6th Amendment) Rules, 2022 to further amend the Income-tax Rules, 1962.  With this amendment, CBDT has notified Rule 21AAA and Form No. 10-EE to be filed by a person claiming relief under section 89A of the Income Tax Act. As per the Rule, if the income from foreign retirement funds is taxed at the time of redemption or withdrawal in the foreign jurisdiction, the assessee shall have the option to include such income in that relevant previous year (previous year in which withdrawal/redemption is made).

Form No. 10EE

To exercise this option, the specified person is required to e-file Form No. 10-EE on or before furnishing return of income. Further, once this option is exercised, it will apply to all subsequent previous years and cannot be withdrawn.

ITR Forms for the AY 2022-23 seek details of income from overseas retirement benefit accounts

The Central Board of Direct Taxes (CBDT) has recently notified forms ITR Forms for the AY 2022-23 or FY 2021-22. While largely the details remain the same as last year, there is fresh addition where taxpayers have to give details of income from overseas retirement benefit accounts from taxpayers.

The ITR-1 form seeks details on income from retirement benefits accounts maintained in a foreign country for the calculation of net salary.

It also seeks details on whether or not the said retirement benefits account was maintained in a notified country under section 89A of the Income Tax Act.

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