In Budget 2024, significant amendments are proposed to Sections 197 and 206C of the Income-tax Act to improve compliance and reduce financial strain on taxpayers. Section 197, which currently allows for lower TDS rates, will be expanded to include Section 194Q, dealing with TDS on purchases exceeding ₹50 lakh. Additionally, Section 206C will see an amendment to include Section 206C(1H) within its scope, which mandates TCS on sales exceeding ₹50 lakh. These changes aim to alleviate issues where taxpayers face blocked funds and additional compliance burdens due to discrepancies between TDS and TCS. The proposed amendments, effective from October 1, 2024, are designed to simplify the process for obtaining certificates for lower rates of deduction and collection, thus easing the financial and administrative challenges for taxpayers.
Budget 2024: Extending the scope for lower deduction / collection certificate of tax at source
Section 197 of the Act provides that payments on which tax is required to be deducted under certain sections of Chapter XVII-B, are eligible for certificate for deduction at lower rate. Further, sub-section (9) of section 206C of the Act provides that sums on which tax is required to be collected under sub-section (1) or subsection (1C), are eligible for collection of tax at lower rate.
2. Section 194Q of the Act, requires every person being a buyer, who pays to a resident, being the seller, for the purchase of any goods of the value or aggregate of value exceeding fifty lakh rupees in any previous year, to deduct tax at the rate of 0.1% of such sum exceeding fifty lakh rupees.
3. Further, sub-section (1H) of section 206C of the Act, requires every person being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than exceptions given therein, to collect tax at the rate of 0.1% of such consideration exceeding fifty lakh rupees.
4. Representations have been received that there are instances where the taxpayers are incurring losses and due to tax deducted under section 194Q of the Act, their funds are getting blocked. Moreover the tax deducted has to be refunded in such cases. It is also stated that there is additional compliance as a seller liable for TCS needs to also verify whether the buyer has deducted tax or not.
5. Therefore, to facilitate ease of doing business and to provide an option to seek a lower deduction certificate so as to reduce compliance burden on the assessee, it is proposed:
(a) to amend sub-section (1) of section 197 to bring section 194Q in its ambit
(b) to amend sub-section (9) of the section 206C to bring sub-section (1H) of section 206C in its ambit.
6. The amendments will take effect from the 1st day of October, 2024.
Extract of Clause 65 of Finance Bill 2024
Clause 65 of the Bill seeks to amend section 197 of the Income-tax Act relating to certificate for deduction at lower rate.
Sub-section (1) of the said section provides that where, in the case of any income of any person or sum payable to any person, income-tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O and 195, the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax, as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate.
It is proposed to amend the said sub-section so as to include the provisions relating to deduction of tax at source on payment of certain sum for purchase of goods under section 194Q also within its scope.
This amendment will take effect from 1st October, 2024.
Extract of Clause 70 of Finance Bill 2024
Clause 70 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 (9) of the section 206C provides that where the Assessing Officer is satisfied that the total income of the buyer or licensee or lessee justifies the collection of the tax at any lower rate than the relevant rate specified in sub-section (1) or sub-section (1C), the Assessing Officer shall, on an application made by the buyer or licensee or lessee in this behalf, give to him a certificate for collection of tax at such lower rate than the relevant rate specified in sub-section (1) or sub-section (1C).
It is also proposed to amend sub-section (9) of the said section so as to include sub-section (1H) of that section under its purview.
These amendments will take effect from 1st October, 2024.
65. Amendment of section 197.
In section 197 of the Income-tax Act, in sub-section (1), for the figures and letter “194-O”, the figures and letters “194O, 194Q” shall be substituted with effect from the 1st day of October, 2024.
70. Amendment of section 206C.
In section 206C of the Income-tax Act, ––
(e) with effect from the 1st day of October, 2024,––
(i) in sub-section (9), for the words, brackets, figures and letter “sub-section (1) or sub-section (1C)” at both the places where they occur, the words, brackets, figures and letters “sub-section (1), sub-section (1C) or subsection (1H)” shall be substituted;
