Format for Letter to be Issued by the Seller to the Buyer for TDS & TCS Compliance u/s 206C(1H) & 194Q

(On the Letterhead of Seller)

To,

(Buyers Name & Address)

Sub: Regarding declaration due changes in provision under Income Tax Act-1961

Dear Sir / Madam,

We, ________________________, having PAN______________ hereby inform you that our total sales/gross receipts/turnover during financial year 2020-21 was more than Rs.10 Crore. Therefore, provisions of Section 206C(1H) are applicable for the purpose of collection of tax at source on receipt of sale consideration of goods purchased by you during the current financial year on the amount exceeding Rs.50 lacs. In relation to compliance with above provisions we require following information / declaration from you: –

1. As you know that w.e.f. 01.07.2021 Section 194Q is applicable. In case you are liable to deduct tax under section 194Q of the Act, tax will not be collectible by our company under section 206C(1H) of the Act w.e.f. 01.07.2021.

Please confirm that you are liable to deduct tax at source under section 194Q of the Act from payment of purchase consideration to be made / credited to us. On receipt of above confirmation, we will not be taking any action for collection of tax at source as per section 206C(1H) of the Act, otherwise we will be collecting tax from you as per above Section.

2. You are also requested to intimate us for your Permanent Account Number. In case you fail to provide your PAN, tax will be deducted at the rate of 1 percent instead of 0.1 percent in terms of Section 206CC of the Act.

3. Further, you are also required to confirm that in your case amount of TDS/TCS was Rs.50,000/- or more in previous years relevant to Assessment Years 2019-20 and 2020-20 and you have filed your returns of income for these assessment years as per section 139(1). Please also provide acknowledgement numbers for filing the same, otherwise tax is required to be deducted at the rate of 5 percent in terms of Section 206CCA of the Act.

You may send to us your declaration in the enclosed draft on or before 20.06.2021 to enable us to take note of same and modify our accounting software accordingly. In case your declaration is not received by us by the above date, we will modify our software to collect tax at the rate of 5 percent and charge TCS u/s 206C(1H). It would be difficult for us to take corrective action to reduce the rate during the current financial year.

Thanks & Regards,

For ________________Ltd.

Authorised Signatory
[Seller]

Date :

Place:

Format for letter to be written by the buyer to the seller for New TDS / TCS compliance   [On the letter head of the Buyer]     To,       __________________________   [Name & Address of Seller]       Sub: Declaration / information for deduction of tax at source u/s 194Q of the Income Tax Act-1961     Dear Sir,     This is with reference to your letter dated _________ requiring our declaration /information in regard to Collection of tax at source u/s 206C(1H) of the Income Tax Act.   The information is being provided hereunder:   1.      Turnover of our company during Financial Year 2020-21 was more than Rs. 10 Crores. Therefore, our company is liable to deduct tax u/s 194Q of the Act @ 0.1 % of sale consideration to be paid / credited to your company on or after 01.07.2021 by us on the amount exceeding Rs.50 lacs during the current financial year. Hence, we request you not to take any action to collect tax under section 206C(1H) of the Act. Or Turnover of our company during Financial Year 2020-21 was not more than Rs. 10 Crores. Therefore, our company is not liable to deduct tax u/s 194Q of the Act. You may, therefore, continue to comply with provisions of Section 206C(1H) of the Act to collect tax on the amount of sale consideration exceeding Rs. 50 lacs.     2.      Permanent Account Number of our company is ________. Further we have duly filed our returns of income for Assessment Years 2019-20 and 2020-21 as per information given hereunder: A.Y. Date of Filing return Acknowledgement No. 2019-20 2020-21 Please take note of above information and confirmation and collect tax at the appropriate rate taking cognizance of above information.     Thanks & Regards   _______________________ [Buyer]