The Income Tax Act, of 1961 is an essential document that regulates the taxation system in India. It outlines various provisions related to the payment of taxes by individuals, businesses, and other entities. One such provision is Section 206C(7), which deals with the collection of tax at source by sellers of certain goods. In this article, we will take a closer look at this provision, its applicability, and the impact it has on taxpayers.
What is Section 206C(7)?
Section 206C(7) of the Income Tax Act, 1961, requires the seller to collect tax at the source from the buyer at the time of sale of certain goods. The tax collected is then deposited with the government. The provision applies to the sale of goods listed under the First Schedule to the Central Excise Tariff Act, 1985, and includes items such as alcohol, motor vehicles, and minerals.
Applicability of Section 206C(7):
The provisions of Section 206C(7) apply to sellers who sell goods listed in the First Schedule of the Central Excise Tariff Act, 1985, to a buyer whose turnover exceeds INR 10 crores. The provision applies regardless of whether the buyer is a resident or a non-resident of India. Additionally, the seller must be registered under the Income Tax Act, of 1961, and have a valid Tax Deduction and Collection Account Number (TAN).
Provisions of Section 206C(7):
Under Section 206C(7), the seller must collect tax at the source from the buyer at the time of sale of goods. The tax collected is at the rate of 0.1% of the sale consideration. In case the buyer does not have a Permanent Account Number (PAN), the tax rate is 1% of the sale consideration. The seller is required to collect and deposit the tax within 7 days from the end of the month in which the tax was collected.
Exceptions to Section 206C(7): There are certain exceptions to the provisions of Section 206C(7). The provision does not apply in the following cases:
- If the buyer is the Central Government, a State Government, an embassy, a High Commission, a Consulate, or an International Organization.
- If the buyer is engaged in the manufacturing or production of goods and has a turnover of less than INR 100 crores in the previous financial year.
- If the buyer is engaged in the trading of goods and has a turnover of less than INR 10 crores in the previous financial year.
Impact of Section 206C(7) on taxpayers:
The provisions of Section 206C(7) have a significant impact on taxpayers, particularly sellers of goods listed in the First Schedule of the Central Excise Tariff Act, 1985. Sellers must ensure compliance with the provisions of the Act to avoid penalties and legal repercussions. Additionally, buyers must ensure that they have a PAN to avoid the higher tax rate of 1%.
Conclusion:
In conclusion, Section 206C(7) of the Income Tax Act, 1961, is an essential provision that regulates the collection of tax at the source from buyers of certain goods. The provision applies to sellers who sell goods listed in the First Schedule of the Central Excise Tariff Act, 1985, to a buyer whose turnover exceeds INR 10 crores. The tax collected is at the rate of 0.1% of the sale consideration and must be deposited within 7 days from the end of the month in which the tax was collected.
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Frequently Asked Questions:
Q.1 What is Section 206C(7) of the Income Tax Act, 1961?
A: Section 206C(7) of the Income Tax Act, 1961, is a provision that requires sellers of certain goods listed in the First Schedule of the Central Excise Tariff Act, 1985, to collect tax at the source from the buyer at the time of sale.
Q.2 Which goods are covered under Section 206C(7)?
A: Section 206C(7) applies to goods listed in the First Schedule of the Central Excise Tariff Act, 1985, including items such as alcohol, motor vehicles, and minerals.
Q.3 Who is required to collect tax at the source under Section 206C(7)?
A: Sellers who sell goods listed in the First Schedule of the Central Excise Tariff Act, 1985, to a buyer whose turnover exceeds INR 10 crores, are required to collect tax at the source.
Q.4 What is the rate of tax to be collected under Section 206C(7)?
A: The tax rate is 0.1% of the sale consideration. If the buyer does not have a PAN, the tax rate is 1% of the sale consideration.
Q.5 What is the due date for depositing tax collected under Section 206C(7)?
A: The tax collected must be deposited within 7 days from the end of the month in which the tax was collected.
Q.6 Are there any exceptions to the provisions of Section 206C(7)?
A: Yes, the provision does not apply if the buyer is the Central Government, a State Government, an embassy, a High Commission, a Consulate, or an International Organization. Additionally, the provision does not apply to buyers engaged in the manufacturing or production of goods with a turnover of less than INR 100 crores in the previous financial year or to buyers engaged in the trading of goods with a turnover of less than INR 10 crores in the previous financial year.
Q.7 What are the consequences of non-compliance with the provisions of Section 206C(7)?
A: Non-compliance with the provisions of Section 206C(7) may result in penalties and legal repercussions, including the disallowance of expenses claimed in the Income Tax Return.
Q.8 Is it mandatory for sellers to have a TAN to collect tax at the source under Section 206C(7)?
A: Yes, sellers must be registered under the Income Tax Act, 1961, and have a valid Tax Deduction and Collection Account Number (TAN) to collect tax at the source under Section 206C(7).
Q.9 Does the provision of Section 206C(7) apply to non-resident buyers?
A: Yes, the provision applies to both resident and non-resident buyers of certain goods listed in the First Schedule of the Central Excise Tariff Act, 1985.
