Exemption from tax collection at source under sub-section (1F) of section 206C in case of certain specified buyers.

The existing provision of sub-section (1F) of section 206C of the income tax Act, inter-alia provides that the seller who receives consideration for sale of a motor vehicle exceeding ten lakh rupees, shall collect one per cent of the sale consideration as tax from the buyer.

In order to reduce compliance burden in certain cases, it is proposed to amend section 206C, to exempt the following class of buyers such as the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; local authority as defined in explanation to clause (20) of Section 10; a public sector company which is engaged in the business of carrying passengers, from the applicability of the provision of sub- section (1F) of section 206C of the Act.

This amendment will take effect from 1st April, 2017.

[Clause 71]

Relevant Section 206(1F) and Explanation after Finance Act 2017

Section 206(1F) [Inserted by the Finance Act, 2016, w.e.f. 1-6-2016.]

(1F) Every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding ten lakh rupees, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to one per cent of the sale consideration as income-tax.

Explanation.—For the purposes of this section,—

(aa)        “buyer” with respect to

…….

iii)          sub-section (1F) means a person who obtains in any sale, goods of the nature specified in the said sub-section, but does not include,— [Inserted by the Finance Act, 2017, w.e.f. 1-4-2017.]

(A)         the Central Government, a State Government and an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or

(B)          a local authority as defined in Explanation to clause (20) of section 10; or

(C)          a public sector company which is engaged in the business of carrying passengers. ]

Relevant Clause 71 of Finance Bill 2017- Amendment of section 206C.

In section 206C of the Income-tax Act,—

(a) in sub-section (1D),—

(A) for the words and brackets “or jewellery or any other goods (other than bullion or jewellery)”, the words and brackets “or any other goods (other than bullion)” shall be substituted;

(B) clause (ii) shall be omitted;

(b) in sub-section (1E), the words “or jewellery” shall be omitted;

(c) in the Explanation occurring after sub-section (11),—

(A) in clause (aa),—

(I) in sub-clause (ii), the words, brackets, figure and letter “or sub-section (1F)” shall be omitted;

(II) after sub-clause (ii), the following sub-clause shall be inserted, namely:—

“(iii) sub-section (1F) means a person who obtains in any sale, goods of the nature specified in the said sub-section, but does not include,—

(A) the Central Government, a State Government and an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or (B) a local authority as defined in Explanation to clause (20) of section 10; or

(C) a public sector company which is engaged in the business of carrying passengers.”;

(B) clause (ab) shall be omitted.

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