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Union Budget 2021-22

Amendments in TDS/TCS Provisions

Over the years it has
been observed that the
TDS is deducted and
TCS collected but the
corresponding return
CA. Avinash Rawani
of income are not filed
The author is a member of the Institute. He can be
within the stipulated reached at [email protected] and [email protected].
time. The Finance Bill,
2021 is set to change
the scenario with a The amendments and This Finance Bill, 2021 has
significant proposal introduction of new provisions also proposed to introduce
that is expected to are significant and have certain provisions like Section
increase the number potential for replacement of 206AB and Section 206CCA to
of return filers. From Income Tax Returns filings encourage deductees to file their
Returns, pay their correct taxes
1st April, 2021, the making it just a procedural
and claim their refunds, if any
deductors will have submission of documentary
due. Resultingly, the percentage
to ensure that before evidence for record purposes. of individual return filers which
making the payment Some of the amendments in are presently less than 1% of
to the suppliers and the proposed provisions are a the total population of the
welcome move as the same were
deducting TDS or country are bound to increase
required based on the genuine with the implementation of new
collecting TCS, the provisions.
hardships faced by the business
provisions for filing houses at large and are also in
the return of income line with the globally accepted
The proposed amendments
with effective dates have been
by certain classes of policies. tabulated as under:
people are properly
complied. Almost all
the payments made
have been covered for
TDS deduction till the
last enacted Finance
Act, 2020. However,
in the proposed
Finance Bill, 2021, the
amendments proposed
are only to the three
existing provisions
and introduction of
two new provisions.
Read on…

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Union Budget 2021-22

Section TDS/ New/Scope Assessees Brief Basic Rate of Proposed

TCS Expanded/ covered Exemption TDS Effective
Relief Limit Date
194 TDS Relief Body Business ` 5,000 10% 1st April, 2020
Corporate Trust notified
or any other
notified
person by
Government
shall be
exempted
from
deduction
194A TDS Relief Infrastructure Relief to NA - 1st April, 2021
Debt Infrastructure
Company Debt
(replaced) Company
194IB TDS Scope Non-Filers of TDS to be ` 50,000 per 5% 1st April, 2021
Expanded Income Tax deducted month
Returns at higher
rate in case
of certain
category of
non-filers of
Returns
194P TDS New Specified Deductions ` 5,00,000 10% 1st April, 2021
Senior under
Citizens Chapter VIA
and Rebate
under Section
87A to be
given
194Q TDS New Purchase of Purchase ` 50,00,000 0.1% (5% 1st July, 2021
Goods of goods where
exceeding no PAN/
` 50 Lakhs Aadhar is
in a financial furnished)
year to any
person
196D TDS Relief Non Resident Benefit of N.A. - 1st April, 2021
Assesses Treaty or
Income Tax
Rate Lower
Rate to be
Applied

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Provisions relating Section 196D – TDS on
to Deductions of Tax Income of FII from Securities
effective frm 1st April,
2020
The Section has been modified The percentage of
in order to rationalise
individual return filers
Section 194 – TDS on the provision concerning
Dividends withholding on payments which are presently less
made to Foreign Institutional than 1% of the total
Provision relating to deduction
of TDS on Distribution of
Investors (FIIs). Accordingly, it population of the country
is proposed to insert a proviso
Dividend was introduced to subsection (1) of section
are bound to increase with
and made effective from 1st 196D of the Act to provide that the implementation of new
April, 2020 by withdrawing in case of a payee to whom an provisions.
Dividend Distribution Tax in agreement referred to in section
the Finance Act, 2020. The 90(1) or section 90A(1) applies
second proviso to Section 194 Banks will have to update their
and such payee has furnished
stated that this section shall software accordingly should not
the Tax Residency Certificate
not apply if the dividend is be a challenging task in the era
as required section 90(4) or
paid to insurance company or section 90A(4) of the Act, then of digitisation.
insurers. The Finance Bill 2021, the tax shall be deducted at the For the purpose of this Section,
now proposes to extend this rate of twenty per cent or rate the explanations given by the
benefit retrospectively also to or rates of income-tax provided provisions in the Finance Bill
business trust and states that if in such agreement for such are as under:
any dividend is paid or credited income, whichever is lower.
to a business trust established (a) “specified bank” means a
Section 194P – TDS on banking company as the
for special purpose vehicle or in
Interest to Specified Senior Central Government may,
whose hand dividend is exempt
Citizens by notification in Official
or also payments made to any
other person as may be notified Section 194P has been Gazette, specify;
by Government then TDS will introduced to give specific (b) “specified senior citizen”
not be deducted. relief to the Senior Citizens. means an individual, being a
It has been proposed in the resident in India––
Provisions relating Finance Bill that the Banks
to Deductions of Tax before deducting TDS will have (i) who is of the age of seventy-
effective from 1st April, to take into consideration the five years or more at any
2021 allowable deductions under time during the previous
Section 194A – TDS on Chapter VIA, rebate under year;
Interest Other than Interest Section 87A and then deduct
(ii) who is having income
on Securities TDS. The Banks will have to
of the nature of pension
compute the Total Income of
In section 194A of the Income- and no other income
the specified Senior Citizens
tax Act, in sub-section (3), and deduct the TDS as certain except the income of
in clause (x), after the words category of income earners have the nature of interest
“infrastructure capital fund or”, been exempted from filing of received or receivable
the words “infrastructure debt Return of Income. The Banks from any account
fund or” shall be inserted and will have to take appropriate maintained by such
accordingly the interest payable care and precaution as they individual in the same
to infrastructure debt fund will will be required to report all specified bank in which
not be liable for deduction of such details in the TDS returns he is receiving his
TDS. while filing the eeturns. The pension income; and

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Union Budget 2021-22

(iii) has furnished a The Finance Bill seeks to include 3. If the amount is credited
declaration to the the words, figures and letters to any account by whatever
specified bank in the said provision “section name called, these
containing such 206AA or section 206AB, such provisions shall apply;
particulars, in such that the TDS is now proposed
However, the Central
form and verified in to be deducted at higher of
such manner, as may be Government may, by
applicable rate of any of such
prescribed.’. notification in the Official
section, in case of default by
Gazette, specify for this
Provisions relating including non-filing of Return
purpose, subject to conditions
to Deductions of Tax of Income for a consecutive
as prescribed in such
effective from 1st July, period of two years by a resident
notification shall be exempted
2021 individual or HUF by a rent
from TDS.
receiver.
Section 194A – TDS on It is also stated that if the
Interest other than Interest on Section 194Q- TDS on
transaction is covered for TDS/
Securities Purchase of goods over a limit
TCS under any provision of
In section 194A of the Income- In the last Finance Bill, Section the Act and has deducted such
tax Act, in sub-section (3), 206C(1H) was introduced a levy amount, they shall be exempted
in clause (x), after the words being TCS on sale of goods and from this provision.
“infrastructure capital fund or”, this year, a new Section 194Q,
Other Provisions
the words “infrastructure debt being TDS on purchase of goods
fund or” shall be inserted and on the similar lines is proposed Section 206CC is proposed to
accordingly the interest payable to be introduced. The proposed be introduced on the lines of
to infrastructure debt fund will Section TDS on purchase of Section 206AB wherein higher
not be liable for deduction of goods above specified limit, of the two rates provided in the
TDS. provided following conditions section, in case of non-filers of
are satisfied: Return of Income.
Section 194IB – Payment of rent
by certain individuals or Hindu 1. Any person, being a buyer, Compliance Provisions
undivided family. who is responsible for
Section 206AB and Section
paying any sum to resident
206CCA have been proposed
(hereinafter referred to as
in the Finance Bill, which will
the “seller”) for purchase
require that the Deductor/
Section 194P has been of any goods of the value
Payer will have to ensure that
introduced to give specific or aggregate of such value
while making payment shall
exceeding in a previous
relief to the Senior year of ` 50 Lakhs deduct
deduct TDS of a resident person
under the provisions of Chapter
Citizens. It has been 0.1% (5% in No PAN/
XVIIB other than Section 192,
proposed in the Finance Adhar cases) of such sum
192A, 194B, 194BB, 194LBC
exceeding ` 50 Lakhs as
Bill that the Banks before income tax;
or 194N, the “specified person”
deducting TDS will have has also filed the Return of
2. A buyer means a person Income for the last two financial
to take into consideration whose total sales, gross years, immediately prior to the
the allowable deductions receipts or turnover from financial year in which payment
under Chapter VIA, rebate the business carried on by is made. In case of non-filing
under Section 87A and him exceed ten crore rupees of Return of Income, by such
during the financial year resident deductee, except
then deduct TDS. immediately preceding the in the cases, where the time
financial year; limit under Section 139(1) has

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applicable under that Section in non-compliance, the TCS will
which payment is made: have to be collected at higher of
CPC/Government will the following rates as applicable
(i) At twice the rate specified
under that Section in which
provide Online verification in the relevant provision of
payment is required to be
mechanism on the the Act; or collected:
website of ITD, in the due (ii) At twice the rate or rates in (i) At twice the rate specified
course, which will enable force; or in the relevant provision of
the Deductor/Payer to (iii) At the rate of five percent. the Act; or
verify whether the Payee/ On the similar lines the (ii) At the rate of five percent.
Recipient has filed the Deductor will also have to CPC/Government will provide
Return of Income for the ensure that while making Online verification mechanism
complying with TCS provisions on the website of ITD, in the
last two years or not. under Section XVIIBB, the due course, which will enable
person to whom the payment the Deductor/Payer to verify
expired and the aggregate TDS is made has filed the Return whether the Payee/Recipient has
and TCS in case is ` 50,000 of Income for the last two filed the Return of Income for
or more in each of these two financial years, immediately the last two years or not as it has
previous years, then the TDS prior to the financial year in now become very user friendly
will have to be deducted at which payment is made on the after the implementation of
higher of the following rates as similar lines. In case of such CPC2.0. 

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