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Income Tax relief, no need to deduct TDS when buying more than 50 lakh shares!

TDS on Shares and Commodities: Income Tax is a great relief. There will be no tax on purchases of Rs 50 lakh.

Mumbai: TDS on Shares and Commodities: Income Tax is a great relief. There will be no tax on purchases of Rs 50 lakh. The Income Tax Department has stated that there is no need to deduct TDS on transactions of purchase of shares or commodities of any value through an approved stock exchange or commodity exchange. Even if they are worth Rs 50 lakh, they will not have to pay tax.

The new provisions take effect from 1 July
The Income Tax Department has introduced a new provision for tax deduction (TDS) from July 1, 2021, which will be applicable to businesses with a turnover of Rs 10 crore. Such traders have to deduct 0.1 per cent TDS when paying residents for purchases of goods worth more than Rs 50 lakh in a financial year. The CBDT, however, clarified that the provision would not apply to transactions of shares or commodities through any stock exchange.

These rules are difficult to apply to stocks
The tax department said it had received several statements in this regard stating that there were practical difficulties in enforcing the provisions of TDS in Section 194Q of the IT Act. In which there are difficulties if the transaction is done through some exchanges and clearing corporations. The transaction does not involve a one-to-one agreement between the buyer and the seller.

What do experts say?
Rajat Mohan, a senior partner at AMRG & Associates, said the goods were transacted only in the GSTN system, as the IT Act never transacts data on transactions in the purchase and sale of goods. Now with these new provisions of TDS, the income tax system will also exchange sales data related to the transaction of goods on a monthly basis. The new rule will tighten its grip on the manufacturing and trading communities, instructing them to submit accurate tax filing data, which will also enhance the tax system.

Rajat Mohan further said that the CBDT has clarified that these TDS provisions do not apply to buyers who do not have business turnover or non-business receipts as they do not have business activity. Thus, families are excluded from deducting TDS, regardless of the value of the non-business financial transactions they have made. Also, Nangia Andersen LLP states that as per the provisions of the CBDT, the buyer is instructed to deduct tax before making a credit or payment, if any of these are paid before July 1, 2021, TDS will not be deducted on the transaction. Also, the limit of Rs 50 lakh for TDS will be implemented from April 1, 2021.


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