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CMA Intermediate · Direct and Indirect Taxation · Tax Deducted at Source and Tax Collected at Source

Under the Income-tax Act, 2025, a resident buyer purchases iron ore and gives the seller a written declaration in the prescribed form. Which declaration content lets the seller skip TCS?

The seller need not collect tax if the resident buyer furnishes a written declaration in duplicate that the iron ore will be used for manufacturing, processing or producing articles or generating power, and not for trading purposes, as provided in section 394(2).

  1. AThe ore will be used for manufacturing, processing or producing articles or generating power, and not for tradingCorrect
  2. BThe ore will be resold within the same tax year at a small margin
  3. CThe buyer's total income is below the basic exemption limit
  4. DThe buyer has already paid advance tax for the year

Explanation

Section 394(2) exempts collection on Sl. Nos. 1 to 5 where a resident buyer declares in duplicate that the goods will be used for manufacturing, processing, producing or power generation and not for trading. The other options are not grounds for non-collection.

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