TDS / TCS Amendments in Budget, 2021
A. Section 194 -TDS on Dividend (w.e.f 01st April 2020)
In section 194 of the Income-tax Act, in the second proviso, after clause (c), the following clauses shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2020, namely:––
‘(d) a “business trust”, as defined in clause (13A) of section 2, by a special purpose vehicle referred to in the Explanation to clause (23FC) of section 10;
(e) any other person as may be notified by the Central Government in the Official Gazette in this behalf.’ This amendment proposes to amend second proviso to section 194 of the Act to further provide that the provisions of section 194 i.e. TDS on dividend shall also not apply to dividend income credited or paid to a business trust by a special purpose vehicle or payment of dividend to any other person as may be notified. This means that no TDS needs to be deducted to AIF Category III also.
B. Section 194A – TDS on Interest other than “Interest on securities” (w.e.f 01st April 2021)
In section 194A of the Income-tax Act, in sub-section (3), in clause (x), after the words “infrastructure capital fund or”, the words “infrastructure debt fund or” shall be inserted.
C. Section 194IB –TDS on Purchase of Immovable Property (w.e.f 01st July 2021)
In section 194-IB of the Income-tax Act, in sub-section (4), for the words, figures and letters “section 206AA,
such”, the words, figures and letters “section 206AA or section 206AB, such” shall be substituted with effect from the 1st day of July,2021.
D. Section 194P – TDS on Interest to Specified Senior Citizen (w.e.f 01st April, 2021)
(1) Notwithstanding anything contained in the provisions of Chapter XVII-B, in case of a specified senior citizen, the specified bank shall, after giving effect to the deduction allowable under Chapter VI-A and rebate allowable under section 87A, compute the total income of such specified senior citizen for the relevant assessment year and deduct income-tax on such total income on the basis of the rates in force.
(2) The provisions of section 139 shall not apply to a specified senior citizen for the assessment year relevant to the previous year in which the tax has been deducted under subsection (1).
(a) “specified bank” means a banking company as the Central Government may, by notification in Official Gazette, specify;
(b) “specified senior citizen” means an individual, being a resident in India––
(i) who is of the age of seventy-five years or more at any time during the previous year;
(ii) who is having income of the nature of pension and no other income except the income of the nature of interest received or receivable from any account maintained by such individual in the same specified bank in which he is receiving his pension income; and
(iii) has furnished a declaration to the specified bank containing such particulars, in such form and verified in such manner, as may be prescribed.’
To provide relief to senior citizens who are of the age of 75 year or above and having only Pension Income and Interest Income from same Specified Bank & no other Income is not required to file Income tax return. Such Senior Citizen shall be required to furnish a declaration to the specified bank. The declaration shall be containing such particulars, in such form and verified in such manner, as may be prescribed. It is mandatory for that specified Bank to report Such Senior Citizen details under Section 194P after obtaining due declaration from Pensioners.
E. Section 194Q – TDS on Purchase of Goods (w.e.f 01st July, 2021)
(1) Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent. of such sum exceeding fifty lakh rupees as income-tax. Explanation. ––For the purposes of this sub-section, “buyer” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out, not being a person, as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.
(2) Where any sum referred to in sub-section (1) is credited to any account, whether called “suspense
account” or by any other name, in the books of account of the person liable to pay such income, such credit of income shall be deemed to be the credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
(3) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty.
(4) Every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and the person liable to deduct tax.
(5) The provisions of this section shall not apply to a transaction on which––
(a) tax is deductible under any of the provisions of this Act; and
(b) tax is collectible under the provisions of section
(c) 206C other than a transaction to which sub-section (1H) of section 206C applies.’
Buyer needs to deduct TDS @ 0.1% on purchases of goods amount exceeding Rs.50 lacs, subject to turnover of buyer exceeding Rs.10 Crores in previous Financial year, however if on a transaction a TDS or tax collection at source (TCS) is required to be carried out under any other provision, then it would not be subjected to TDS under this section. There is one exception to this general rule. If on a transaction TCS is required under sub-section (1H) of section 206C as well as TDS under this section, then on that transaction only TDS under this section shall be carried out.
Section 206AA has been also amended to further provide that where Permanent Account Number (PAN) is not provided, the TDS under section 194Q shall be at the rate of five per cent.
F. Section 196D – TDS on Income of Foreign Institutional Investors from securities. (w.e.f 01st April, 2021)
In section 196D of the Income-tax Act, in sub-section (1), the following proviso shall be inserted, namely:–
“Provided that where an agreement referred to in subsection (1) of section 90 or sub-section (1) of section
90A applies to the payee and if the payee has furnished a certificate referred to in sub-section (4) of section 90 or sub-section (4) of section 90A, as the case may be, then, income-tax thereon shall be deducted at the rate of twenty per cent. or at the rate or rates of income-tax provided in such agreement for such income, whichever is lower.”.
Benefit of DTAA rates will be applicable on Income of Foreign Institutional Investors from securities.
Rate of TDS on Foreign Institutional Investors will be DTAA rates or 20% whichever is lower.
G. Section 206AA – Higher Rate of TDS (w.e.f 01st July,2021)
In section 206AA of the Income-tax Act, in sub-section (1), after the proviso, the following proviso shall be inserted with effect from the 1st day of July 2021, namely: ––
‘Provided further that where the tax is required to be deducted under section 194Q, the provisions of clause
(iii) shall apply as if for the words “twenty per cent.”, the words “five per cent.” had been substituted.’.
Maximum rate of TDS u/s 194Q-TDS on purchase of Goods is 5% instead of 20% in case of PANNOTAVBL cases.
H. Section 206AB – Special provision for deduction of tax at source for non-filers of income- tax return. (w.e.f 01st July, 2021)
(1) Notwithstanding anything contained in any other provisions of this Act, where tax is required to be deducted at source under the provisions of Chapter XVIIB, other than sections 192, 192A, 194B, 194BB, 194LBC or 194N on any sum or income or amount paid, or payable or credited, by a person (hereafter referred to as deductee) to a specified person, the tax shall be deducted at the higher of the
following rates, namely:––:
(i) at twice the rate specified in the relevant provision of the Act; or
(ii) at twice the rate or rates in force; or
(iii) at the rate of five per cent.
(2) If the provisions of section 206AA is applicable to a specified person, in addition to the provision of this section, the tax shall be deducted at higher of the two rates provided in this section and in section 206AA.
(3) For the purposes of this section “specified person” means a person who has not filed the returns of income for both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be deducted, for which the time limit of filing return of income under sub-section (1) of section 139 has expired; and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in each of these two previous years:
Provided that the specified person shall not include a non-resident, who does not have a permanent establishment in India.
Explanation. ––For the purposes of this sub-section, the expression “permanent establishment”
includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.’
Budget 2021 also proposed to insert a new section 206AB in the Income Tax Act as a special provision providing for a higher rate for tax deducted at source (TDS) for the non-filers of incometax return. This provision will be applicable to all sections except TDS on Salary, TDS on cash withdrawal, TDS on lottery and Horse Races.
I. Section 206CCA – Special provision for collection of tax at source for non-filers of income-tax return (w.e.f 01st July, 2021)
(1) Notwithstanding anything contained in any other provisions of this Act, where tax is required to be collected at source under the provisions of Chapter XVII-BB, on any sum or amount received by a person (hereafter referred to as collectee) from a specified person, the tax shall be collected at the higher of the following two rates, namely:––
(i) at twice the rate specified in the relevant provision of the Act; or
(ii) at the rate of five per cent.
(2) If the provisions of section 206CC is applicable to a specified person, in addition to the provisions of this section, the tax shall be collected at higher of the two rates provided in this section and in section 206CC.
(3) For the purposes of this section “specified person” means a person who has not filed the returns of income for both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be collected, for which the time limit of filing return of income under subsection (1) of section 139 has expired; and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in each of these two previous years:
Provided that the specified person shall not include a non-resident, who does not have a permanent establishment in India.
Explanation. ––For the purposes of this sub-section, the expression “permanent establishment” includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.’.
Budget 2021 also proposed to insert a new section 206CCA in the Income Tax Act as a special provision providing for a higher rate for tax collected at source (TCS) for the non-filers of income tax return.