The Finance Bill 2024 proposes significant amendments to Section 206C of the Income-tax Act, which deals with tax collection at source (TCS) on transactions like trading in alcoholic liquor and forest produce. Currently, the interest rate for late TCS payments is 1% per month, a rate that diverges from the higher 1.5% interest applicable for late tax deduction at source (TDS). To rectify this inconsistency, the Bill proposes increasing the interest rate on late TCS payments to 1.5% per month starting April 1, 2025. This change aims to align TCS rates with TDS provisions and address delays in tax collections. Additionally, the Bill includes provisions for amendments to collection procedures, including new rules for correction statements and tax credit allocations. The adjustments also extend to new sub-sections to prevent default orders beyond a specific period and allow tax collection at lower rates under certain conditions. These amendments will enhance compliance and streamline the tax collection process, ensuring more timely revenue for the Central Government.
Budget 2024: Alignment of interest rates for late payment to Government account of TCS
Section 206C of the Act provides for the collection of tax at source (TCS) on business of trading in alcoholic liquor, forest produce, scrap etc. Sub-section (7) of the section 206C provides that persons who fail to collect tax or after collecting, fail to deposit the same to the credit of the Central Government shall be liable to pay simple interest at the rate of one percent for every month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which the tax was paid.
2. It was noted that the rates of interest applicable for late collection / late deposit of TCS are not in line with provisions of sub-section (1A) of section 201 pertaining to late deduction / deposit of TDS. A higher interest rate of 1.5% is applicable where tax has been deducted but not been deposited to Government account due to the gravity attached with the failure, as it deprives the deductee of due tax credit and does not reach the Central Government in time. Same difficulty is also faced by the collectee.
3. To align the rate of simple interest charged on failure to pay to Government account after collection of tax it is proposed to amend sub-section (7) of section 206C, to specify that simple interest for non-payment of tax collected at source to Government account, is to be increased from one per cent. to one and one-half per cent. for every month or part thereof on the amount of such tax from the date on which such tax was collected to the date on which such tax is actually paid.
4. The amendment will take effect from the 1st day of April, 2025.
[Clause 70]
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.
It is proposed to substitute sub-section (1F) of the said section to extend its scope to, inter alia, provide that every person, being a seller, who receives any amount as consideration for sale of any other goods of value exceeding ten lakh rupees, as may be notified by the Central Government shall, at the time of receipt of such amount, collect from the buyer, a sum equal to one per cent. of the sale consideration as income-tax.
This amendment will take effect from 1st January, 2025.
Sub-section (3B) of the said section requires that the person collecting tax may also deliver to the prescribed authority, a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered under the proviso to sub-section (3) in such form and verified in such manner, as may be specified by the authority.
It is further proposed to amend the said sub-section (3B) to provide that no correction statement shall be delivered after the expiry of six years from the end of the financial year in which the statement referred to in the proviso to sub-section (3) is required to be delivered.
This amendment will take effect from 1st April, 2025.
It is also proposed to amend the sub-section (4) of the said section, to provide that credit for amount collected and paid to the Central Government shall also be given to any other person eligible for credit for the amount so collected in a particular assessment year in accordance with the rules as may be made under the said Act.
This amendment will take effect from 1st January, 2025.
Sub-section (7) of the said section provides that if any person who is liable to collect tax at source does not collect it or after so collecting fails to pay the same to the credit of the Central Government, then he shall be liable to pay interest at the rate of one per cent. for every month or part of month on the amount of such tax from the date on which such tax was collected to the date on which such tax is actually paid.
It is also proposed to amend the said sub-section so as to increase the rate of simple interest from one per cent. to one and one-half per cent. if the person responsible for collecting tax, after collecting the tax fails to pay it as required under this section.
It is also proposed to insert a new sub-section (7A) to the said section so as to provide that no order shall be made under sub-section (6A) 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), whichever is later.
These amendments will take effect from 1st April, 2025.
Sub-section (9) of the said section 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.
It is also proposed to insert a new sub-section (12) in the said section so as to provide that no collection of tax shall be made or collection of tax shall be made at such lower rate in respect of specified transaction, from such person or class of persons, including institution, association or body or class of institutions, associations or bodies, as the Central Government may, by notification in the Official Gazette specify in this behalf.
These amendments will take effect from 1st October, 2024.
Amendment of section 206C.
In section 206C of the Income-tax Act, ––
(a) for sub-section (1F), the following sub-section shall be substituted with effect from the 1st day of January, 2025, namely:––
“(1F) Every person, being a seller, who receives any amount as consideration for sale of–
(i) a motor vehicle; or
(ii) any other goods, as may be specified by the Central Government by notification in the Official Gazette,
of the value exceeding ten lakh rupees, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to one per cent. of the sale consideration as income-tax.”;
(b) in sub-section (3B), the following proviso shall be inserted with effect from the 1st day of April, 2025, namely:––
“Provided that no correction statement shall be delivered after the expiry of six years from the end of the financial year in which the statement referred to in the proviso to sub-section (3) is required to be delivered.”;
(c) in sub-section (4), after the words “such person”, the words “or any other person eligible for credit” shall be inserted with effect from the 1st day of January, 2025;
(d) with effect from the 1st day of April, 2025,––
(i) in sub-section (7), for the words “interest at the rate of one per cent. per month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which the tax was actually paid and such interest shall be paid”, the following shall be substituted, namely:––
“interest–
(a) at the rate of one per cent. for every month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which such tax is collected; and
(b) at the rate of one and one-half per cent. for every month or part thereof on the amount of such tax from the date on which such tax was collected to the date on which such tax is actually paid,
and such interest shall be paid”;
(ii) after sub-section (7), the following sub-section shall be inserted, namely: —
“(7A) No order shall be made under sub-section (6A) 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), whichever is later.”;
(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;
(ii) after sub-section (11), the following sub-section shall be inserted, namely:––
“(12) Notwithstanding anything contained in this section, no collection of tax shall be made or collection of tax shall be made at such lower rate in respect of specified transaction, from such person or class of persons, including institution, association or body or class of institutions, associations or bodies, as the Central Government may, by notification in the Official Gazette specify in this behalf.”.
