Income Tax TDS/TCS Amendments vide Finance Act, 2021

Amendments in TDS/TCS as notified vide Finance Act, 2021 as passed by Lok Sabha/Rajya Sabha and Assented by Hon’ble President on 28th March 2021:

Hello readers, AS we know TDS /TCS proposals in Finance Bill 2021 notified on 23.03.2021. Let us understand in very simplified manner-

• Amendment in Section 194 – Exemption from TDS on payment of Dividend to business trust-

We all know that TDS @10% required to be deducted if amount exceeds Rs 5000 if payee is an individual. Now question is if payee is not an individual then there is no threshold limit. So amendment is brought in Section 194 that no TDS is required to be deducted on payment of dividend to business trust by special purpose vehicle refered to in Explaination to clause (23FC) of Section 10 or any other person notified.

This amendment will take effect from 01.04.2021.

• Amendment in Section 194A- No TDS on payment of interest by an infrastructure debt fund-

Tax shall not deducted on Income in relation to Zero coupon bond issued by infrastructure debt fund.

This amendment will take effect from 01.04.2021.

• Amendment in Section 194-IB – Higher rate of TDS for non-filers of ITR

As we know Section 194-IB provides for deduction of income tax from the payment of rent by certain individuals or Hindu undivided family.
Sub-section (1) of the said section provides that any person, being an individual or a Hindu undivided family, responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct an amount equal to five per cent of such income as income-tax thereon.

Amendment is brought in this section that in case tax is required to be deducted as per provision of Section 206AA( Non-furnishing of PAN) or Sec 206AB (Higher rate of TDS for non-filers) such deduction shall not exceed the rentpayable for last month of previous year or last month of tenency as case may be.

This amendment will take effect from 01.07.2021.

• Section 194P – Deduction of tax in case of specified senior citizen

In order to provide relief to senior citizens (Age of 75 years or more), New section inserted to provide relaxation from filling Income tax return if –

√ Senior citizen resident in India, age of 75 years or more during the previous year.

√ He has pension income and no other income.

√ He shall furnish declaration to specified bank giving details of deduction allowable under Chapter VI-A and after allowing rebate u/s 87A specified bank deduct income tax on basis of rates in force.
This amendment will take effect from 01.04.2021

• Section 194Q – Tax Deduction at Source (TDS) on purchase of goods

TDS is required to be deducted by person responsible for paying any sum to any resident for purchase of goods. Rate of TDS would be 0.1%.Further tax is required to be deducted by that buyer 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.Also, Tax is required to be deducted by such person, if the purchase of goods by him from the seller is of the value or aggregate of such value exceeding fifty lakh rupees in the previous year.

Also, 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.

This amendment will take effect from 01.07.2021.

• Amendment in Section 206AA: Higher rate of TDS for deduction u/s 196Q in case of non-PAN deductee-

It is now provided that hat where the tax is required to be deducted under section 194Q and Permanent Account Number (PAN) is not provided, the TDS shall be at the rate of five per cent.

This amendment will take effect from 01.07.2021.

• New Section 206AB: Higher rate for deduction of tax at source (TDS) for non-filers of income-tax return

a. Section 206AB of the Act would apply on any sum or income or amount paid, or payable or credited, by a person (herein referred to as deductee) to a specified person.

b. The specified person is a person who has not filed the returns of income for both of the two assessment years relevant to the two previous years which are immediately before the previous year in which tax is required to be deducted or collected, as the case may be.

c. TDS rate in this section is higher of the followings rates:-

(i) Twice the rate specified in the relevant provision of the Act; or

(ii) Twice the rate or rates in force; or

(iii) The rate of five per cent

d. If the provision of section 206AA of the Act 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 of the Act.

e. 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.
f. Specified person shall not include a non-resident who does not have a permanent establishment in India.

This amendment will take effect from 01.07.2021.

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