Section 206C(7A) of the Income-tax Act prescribes a time limit for deeming a person as an assessee in default for failure to collect tax at source. Currently, this limit is six years from the end of the financial year in which tax was collectible or two years from the financial year in which a correction statement was filed, whichever is later. The proposed amendment aligns Section 206C(7A) with Section 153 by excluding periods such as court stays from the time limit calculation. This change ensures that delays due to legal proceedings do not impact the ability to pass default orders. The amendment will take effect from April 1, 2025.
Budget 2025: Excluding the period such as court stay etc. for calculating time limit to pass an order under section 206C
Sub-section (7A) of section 206C of the Act provides that no order shall be made deeming a person to be an assessee in default for failure to collect the whole or any part of the tax from any person, after the expiry of six years from the end of the financial year in which tax was collectible or two years from the end of the financial year in which the correction statement is delivered under subsection (3B) of section 206C of the Act, whichever is later.
2. While computing the time limit under sub-section (7A) of section 206C of the Act, exclusion of the time period such as period for which proceedings were stayed by an order of any court, etc. is required to be provided.
3. It is proposed that sub-section (7A) of section 206C of the Act is to be amended to provide that relevant provisions of section 153 of the Act would apply to the time limit prescribed in sub-section (7A) of section 206C of the Act.
4. The amendment will take effect from the 1st day of April, 2025.
[Clause 67]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 67 of the Bill seeks to amend section 206C of the Income-tax Act relating to profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc.
Sub-section (1) of the said section provides that every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature as specified, a sum equal to the percentage specified therein, of such amount as income-tax. In case of timber obtained under a forest lease and timber obtained by any mode other than under a forest lease, the rate for tax collection at source is two and one-half per cent.
It is proposed to amend sub-section (1) of the said section so as to provide that for timber or any other forest produce (not being tendu leaves) obtained under a forest lease and on timber obtained by any mode other than under a forest lease, tax will be required to be collected at source at the rate of two per cent.
It is further proposed to amend the Table in the said sub-section to omit serial number (v) and to provide that tax be collected at source in serial number (iii) of the Table on timber and any other forest produce (not being tendu leaves), obtained under a forest lease.
It is also proposed to amend sub-section (1) of the said section so as to insert an Explanation to provide the meaning of the expression “forest produce”.
Sub-section (1G) of said section provides for collection of tax at source by an authorised dealer, who receives an amount, for remittance from a buyer, being a person remitting such amount under the Liberalised Remittance Scheme of the Reserve Bank of India or a seller of an overseas tour program package, who receives any amount from a buyer, being the person who purchases such package, at the rates specified therein.
It is proposed to amend the first, second and fourth provisos to the said sub-section so as to increase the threshold of amount or aggregate of amounts for requirement to collect tax at source under this sub-section as provided therein, to ten lakh rupees.
It is further proposed to amend the third proviso to the said sub-section so as to provide that no tax be collected at source if the amount being remitted out is a loan obtained from any financial institution as defined in section 80E, for the purpose of pursuing any education.
Sub-section (1H) of the said section provides that any person being a seller who receives consideration for sale of any goods of the value or aggregate of value exceeding fifty lakhs rupees in any previous year, to collect from the buyer a sum equal to 0.1% of the sale consideration exceeding fifty lakhs rupees as income-tax, subject to certain conditions.
It is proposed to amend the said sub-section so as to insert a proviso to provide that the provisions of this sub-section shall not apply from 1st April, 2025.
It is further proposed to consequentially omit references of sub-section (1H) in subsection (9) and sub-section (10A) of the said section.
Sub-section (7A) of the said section provides that no order shall be made under subsection (6A) of the said section deeming a person to be an assessee in default for failure to collect the whole or any part of the tax from any person, at any time after the expiry of six years from the end of the financial year in which tax was collectible or two years from the end of the financial year in which the correction statement is delivered under sub-section (3B) of section 206C, whichever is later.
It is proposed to amend the said sub-section so as to insert a proviso to provide that the provisions of sub-sections (3), (5) and (6) of section 153 and Explanation 1 thereof shall apply to the time limit prescribed in sub-section (7A).
These amendments will take effect from 1st April, 2025.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
67. Amendment of section 206C.
In section 206C of the Income-tax Act,
(a) in sub-section (1),––
(i) in the Table,––
(A) against serial number (iii),––
(I) in column (2), for the word “Timber”, the words and brackets “Timber or any other forest produce (not being tendu leaves)” shall be substituted;
(II) in column (3), for the words “two and one-half per cent.”, the words “two per cent.” shall be substituted;
(B) against serial number (iv), in column (3), for the words “two and one-half per cent.”, the words “two per cent.” shall be substituted;
(C) serial number (v) and the entries relating thereto shall be omitted;
(ii) after the proviso, the following Explanation shall be inserted, namely:––
‘Explanation.––For the purposes of this sub-section, “forest produce” shall have the same meaning as defined in any State Act for the time being in force, or in the Indian Forest Act, 1927.’;
(b) in sub-section (1G),––
(i) in the first, second and fourth provisos, for the words “seven lakh rupees” wherever they occur, the words “ten lakh rupees” shall be substituted;
(ii) for the third proviso, the following proviso shall be substituted, namely:––
“Provided also that the authorised dealer shall not collect the sum if the amount being remitted out is a loan obtained from any financial institution as defined in clause (b) of sub-section (3) of section 80E, for the purpose of pursuing any education:”;
(c) in sub-section (1H), after the second proviso, the following proviso shall be inserted, namely:––
“Provided also that nothing contained in the provisions of this sub-section shall apply from the 1st day of April, 2025.”;
(d) in sub-section (7A), the following proviso shall be inserted, with effect from the 1st April, 2025, namely:—
“Provided that the provisions of sub-sections (3), (5) and (6) of section 153 and Explanation 1 thereof shall, so far as may be, apply to the time limit specified in this sub-section.”;
(e) in sub-section (9), for the words, brackets, figures and letters “, sub-section (1C) or sub-section (1H)” at both the places where they occur, the words, brackets, figure and letter “or sub-section (1C)” shall be substituted;
(f) in sub-section (10A), for the brackets, figures, letters and word “(1C), (1F) or (1H)”, the brackets, figures, letters and word “(1C) or (1F)” shall be substituted.
