No TDS u/s 194Q on Goods Purchased From IFSC if Seller Opts for Sec. 80LA Relief | CBDT
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- Last Updated on 7 January, 2025
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Notification No. 3/2025, dated 02-01-2025
Section 197A of the Income Tax Act, 1961 lays down several cases in which the tax deduction is not required to be made. Section 197A(1F) prescribes that no deduction of tax shall be made, or deduction of tax shall be made at such lower rate, from such payment to such person or class of persons, including institution, association or body or class of institutions, associations or bodies, as may be notified by the Central Government in the Official Gazette.
In this regard, the Central Board of Direct Taxes (CBDT) has issued a notification specifying that no tax deduction at source (TDS) under Section 194Q will be required for purchases made from units of International Financial Services Centres (IFSC), provided both buyers and sellers meet specific conditions. Section 194Q provides that every buyer responsible for payment to a resident seller must deduct tax at source at the rate of 0.1% if the aggregate value of goods exceeds Rs. 50 lakhs.
The conditions required for a seller to meet in order to qualify for the exemption are as follows:
a) The seller shall furnish a statement-cum-declaration in the format provided in Form No. 1 to the buyer, giving details of previous years relevant to the ten consecutive assessment years for which the seller opts for claiming deduction under sub-sections (1A) and (2) of section 80LA; and
b) such statement-cum-declaration so furnished shall be verified in the manner specified in the said Form for each previous year relevant to the ten consecutive assessment years for which the seller opts for claiming deduction under sub-sections (1A) and (2) of section 80LA.
The conditions prescribed for a buyer are as follows:
a) The buyer does not deduct tax on payment made or credited to the seller after the date of receipt of the copy of the statement- cum-declaration in the said Form from the seller and
b) Furnish the particulars of all the payments made to the seller on which tax has not been deducted in pursuance of this notification in the statement of deduction of tax referred to in section 200(3) read with Rule 31A of the Income-tax Rules, 1962.
Further, the relaxation under this notification shall be available to the seller only during the said previous years relevant to the ten consecutive assessment years as declared by the seller in the said Form for which deduction under section 80LA of the said Act is being opted and the buyer shall be liable to deduct tax on payments made or credited for any other year.
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