Covid Related Amendments & Relaxations in TDS & TCS Provisions
Due to Covid-19 situation and to battle the coronavirus-induced financial distress the government announced various relief measures to increase liquidity in the hands of an individual. One of these was a reduction in the tax deducted at source (TDS) and tax collected at source (TCS) rates by 25 % on non-salaried payments.
Key Points to be noted
- These rates are applicable from 14th May’2020 to 31st March’2021.
- This provision is not applicable to salaried person (Salaried person to pay tax as per slab rate)
- No Reduction in rate of TDS where the tax is required to be deducted at higher rate due to non furnishing of PAN.
- Rate of TDS and TCS not changed for Non- Residence of India.
The Central Government has made various amendments to existing provisions of TDS & TCS and also inserted some new provisions for the levy of TDS & TCS.
Let us know more in detail about the same.
AMENDMENTS IN TDS
1. Section 194J: Payment for fees for Technical services, Professional services or royalty etc.
| Particulars | (AY 2020-21) | (AY 2021-22) |
|---|---|---|
| TDS Rates | TDS Rates | |
| In case of fees for technical services (not being a professional service, royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic film) (effective from 1st April 2020) | 10% | 2% |
2. Section 194N – TDS on cash withdrawal exceeding Rs 1 crore in a FY - (This section is amended w.e.f. 01.07.2020)
- Applicable to withdrawals made by any person (taxpayer)
- Payers covered
- Any bank (private or public sector)
- A co-operative bank
- A post office
- The tax will be deducted by the payer while making payment to any individual in cash from a taxpayer’s bank account on the amount in excess of Rs 1 crore.
- The limit of Rs 1 crore in a financial year is with respect to per bank or post office account and not a taxpayer’s individual account. For example, a person having three bank accounts with three different banks, he can withdraw cash of Rs 1 crore * 3 = Rs 3 crores without any TDS. Withdrawal from different accounts / branches of the same bank to be added for the overall limit.
| Particulars | (AY 2020-21) | (AY 2021-22) |
|---|---|---|
| TDS Rates | TDS Rates | |
| a) Filed the returns of income for all of the three assessment years relevant to the three previous years and cash withdrawals in excess of Rs. 1 crore | 2% | 2% |
| b) Not Filed the returns of income for all of the three assessment years relevant to the three previous years: (This provision is applicable w.e.f. 01 July, 2020) | Cash withdrawals from Rs. 20 Lakhs to Rs. 1 Crore - NA | Cash withdrawals from Rs. 20 Lakhs to Rs. 1 Crore - 2% |
| Cash withdrawals in excess of Rs. 1 crore - 2% | Cash withdrawals in excess of Rs. 1 crore - 2% till 30 June, 2020 and 5% from 01 July, 2020 |
NEW PROVISIONS IN TDS
(This Section is inserted by Finance Act, 2020 which is applicable from 01/04/202
1. Section 194K - Tax Deduction on Income From Mutual Fund Units
Any person responsible for paying an income to a resident with respect to:
- Units of a Mutual Fund as per Section 10(23D)
- Units from the Administrator
- Units from a specified company
exceeding Rs 5000 shall deduct TDS @10%, at the time of credit of such income to the payee’s account or at the time of making payment, whichever is earlier.
2. Section 194O: Applicable for E-Commerce operator
| Particulars | (AY 2020-21) | (AY 2021-22) |
|---|---|---|
| TDS Rates | TDS Rates | |
| Sale of goods or provision of service facilitated by it through its digital or electronic facility or platform to the e-commerce participant. | NA | 1% |
| In case the E-commerce participant does not furnish PAN or Aadhar Number to the e-commerce operator, TDS shall be deducted at the rate of 5% under section 206AA of the Act | ||
NEW PROVISIONS FOR TCS
1. Section 206C(1G)(a) - TCS on foreign remittance through Liberalized Remittance Scheme (LRS)
| Particulars | (AY 2020-21) | (AY 2021-22) |
|---|---|---|
| TDS Rates | TDS Rates | |
| An authorized dealer (person authorized by RBI) receiving an amount of Rs. 7 lac or more in a financial year shall be liable to collect TCS from buyer being a person remitting such amount out of India | NA | 5% |
| For non PAN or Aadhar cases, TDS shall be deducted at the rate of 10%. | ||
2. 206C(1H) - TCS on sale of any goods [except goods on which TCS applicable as per Section 206C (1), 206C (1F) and 206C (1G) i.e. covered under existing sections]
| Particulars | (AY 2020-21) | (AY 2021-22) |
|---|---|---|
| TDS Rates | TDS Rates | |
| In case, a seller (being a person, whose turnover in the previous financial year exceeds 10 Crores) makes sale of “goods” whose value, either individually or in aggregate exceeds 50 Lakhs, the seller shall collect tax at source on the value of sale consideration exceeding 50 Lakhs from the buyer, other than exports. | NA | 0.10% |
| For non PAN or Aadhar cases, TDS shall be deducted at the rate of 1%. | ||
The sections 206C(1G)(a), 206C(1G)(b) and 206C(1H) will not be applicable in following cases:
- If the buyer is liable to deduct TDS under any other provisions and has deducted.
- If a buyer is Central Government, State Government., an embassy, a high commission, a legation, a commission, a consulate, the trade representation of a foreign state, a local authority as defined in Explanation to clause (20) of section 10 or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to conditions as prescribed in such notification.
CONCLUSION
This reduction in TDS & TCS rate would increase cash flows in the hands of receivers and buyers as the reduced rates would be available until the end of the current financial year.
Disclaimer: The contents of this article are for information purposes only and do not constitute any advice or legal opinion and are personal views of the author.
Dated - 21/07/2020
