Understanding Section 206CE of the Income Tax Act
Section 206CE is a provision introduced in the Income Tax Act, 1961, to curb the practice of issuing fake invoices and bogus bills by unscrupulous entities. It requires the specified persons to furnish the details of the goods or services received along with the tax identification number (TIN) or any other unique identification number of the supplier.
Let’s delve deeper into the provisions of Section 206CE and understand its implications.
Who is liable to comply with Section 206CE?
Section 206CE applies to the specified persons who make a payment to a resident seller for the purchase of goods or services of more than INR 50 lakh in a financial year. The specified persons include:
- A person who is required to deduct tax at source (TDS) under any provision of the Income Tax Act, 1961.
- A person who is required to collect tax at source (TCS) under section 206C of the Income Tax Act, 1961.
- A person who is a licensee or lessee of the government and is required to deduct TDS under any law, rule or regulation.
What are the obligations of the specified persons under Section 206CE?
The specified persons are required to obtain the following details from the resident seller and furnish them to the income tax department:
- Name, address, and PAN of the resident seller.
- Goods or services purchased along with the amount paid.
- TIN or any other unique identification number of the resident seller.
The specified persons are required to obtain these details within ten days from the end of the month in which the payment is made. They are required to furnish these details to the income tax department on or before the due date of filing their TDS or TCS return.
What are the consequences of non-compliance with Section 206CE?
Non-compliance with Section 206CE can attract penalties under Section 271H of the Income Tax Act, 1961. The penalty can be levied at the rate of INR 10,000 for each failure to furnish the details required under Section 206CE. The penalty can be waived off if the specified person proves that there was a reasonable cause for such failure.
The purpose of Section 206CE:
The purpose of Section 206CE is to ensure that the specified persons do not indulge in transactions with unscrupulous entities that issue fake invoices or bogus bills. By obtaining and furnishing the details of the resident seller, the government can keep a check on such transactions and prevent tax evasion.
Impact on the specified persons:
The specified persons, such as businesses and government licensees, will have to be more diligent in their transactions and ensure that they obtain the required details from the resident seller. They will also have to ensure that they furnish these details within the stipulated time to avoid penalties. This provision may result in additional compliance costs for the specified persons.
Impact on the resident seller:
The resident seller will have to provide the required details to the specified persons within ten days from the end of the month in which the payment is made. Failure to provide the required details may result in delayed payment or non-payment for the goods or services provided.
Exemption from Section 206CE:
Section 206CE does not apply to the specified persons who are exempt from TDS or TCS provisions under the Income Tax Act, 1961. This includes entities such as banks, financial institutions, and the government.
Conclusion:
Section 206CE is a provision that has been introduced to curb tax evasion and promote transparency in business transactions. The specified persons are required to obtain and furnish the details of the goods or services purchased from the resident seller along with their TIN or any other unique identification number. Non-compliance with this provision can result in penalties. By complying with Section 206CE, businesses can ensure that they maintain a clean record and avoid any legal consequences.
Read more useful content:
- section 234e of income tax act
- section 286 of income tax act
- section 90a of income tax act
- section 40a(7) of income tax act
- section 226(3) of income tax act
- section 24 of income tax act
Frequently Asked Questions (FAQs)
Who is a specified person under Section 206CE?
A specified person is someone who makes a payment to a resident seller for the purchase of goods or services of more than INR 50 lakh in a financial year. This includes those who are required to deduct TDS, collect TCS, or those who are licensees or lessees of the government and are required to deduct TDS.
What is the purpose of Section 206CE?
The purpose of Section 206CE is to curb the practice of issuing fake invoices and bogus bills by unscrupulous entities. It requires specified persons to furnish the details of the goods or services received along with the TIN or any other unique identification number of the supplier.
What are the obligations of the specified persons under Section 206CE?
The specified persons are required to obtain the details of the resident seller, including their name, address, PAN, and TIN or any other unique identification number, and furnish them to the income tax department within ten days from the end of the month in which the payment is made.
What are the consequences of non-compliance with Section 206CE?
Non-compliance with Section 206CE can attract a penalty of INR 10,000 for each failure to furnish the required details. The penalty can be waived off if the specified person proves that there was a reasonable cause for such failure.
Does Section 206CE apply to all transactions?
No, Section 206CE applies only to transactions where the payment made to a resident seller is for the purchase of goods or services of more than INR 50 lakh in a financial year.
Is Section 206CE applicable to non-resident sellers?
No, Section 206CE is applicable only to resident sellers.
What is the due date for furnishing the details required under Section 206CE?
The specified persons are required to furnish the details required under Section 206CE on or before the due date of filing their TDS or TCS return.
Does Section 206CE apply to entities exempt from TDS or TCS provisions?
No, Section 206CE does not apply to entities exempt from TDS or TCS provisions under the Income Tax Act, 1961.
Can the specified person furnish the details required under Section 206CE after the due date?
No, the specified person must furnish the details required under Section 206CE on or before the due date of filing their TDS or TCS return.
How can one avoid penalties under Section 206CE?
One can avoid penalties under Section 206CE by ensuring timely compliance with the provisions of the section, including obtaining the required details from the resident seller and furnishing them to the income tax department within the stipulated time.
