CBDT Measures on issue of Non-TDS Deduction certificate or Lower rate deduction certificate during COVID Lockdown

Introduction:

We all know that the country is facing an outbreak of COVID-19 virus due to which the financial conditions of the assessee is in a bad state due to complete lockdown in the country. Due to the global depression, strict lockdown and down fall in the trade, the financial health of people got seriously affected. To ease the compliance in this pandemic situation and reduce the financial burden on assesses, Government of India has provided with many measures under Monetary policies, Ministry of Corporate Affairs compliance, Direct tax and Indirect tax compliances on 24-03-2020 such as providing moratorium periods, extending due dates and reducing penal interest, fees etc. Further the CBDT has issued a financial ease measure with respect to Non-TDS deduction/ Lower rate deduction certificates for compliance through its order on 31-03-2020.

Provision for non-deduction/lower rate deduction certificate:

Under Income tax, there are multiple provisions as per which TDS/TCS has to be deducted or collected while making the payment of expenditure or income to the payee. It is the obligation of deductor to deduct the TDS and pay the TDS deducted to the credit of revenue within the prescribed periods.

However, in some cases, the payee will be at situation where the TDS amount deducted by the deductor is greater than the amount of tax payable by the assesse. In such situations, the assessee after filing the return of income the assesse can claim the refund. This results in collection of tax amount greater than the tax amount payable. There might be a situation where the income generated by the assesse shall be exempted under section 10, 11, 12 or under tax holidays and in such cases the TDS shall be entirely refunded by the assesse.

In such cases, the government has provided the option of applying for non-TDS deduction certificate in case of exempted income or certificate of deduction at lower rate in case of where tax payable is lesser than the TDS rates applicable by making an application to jurisdictional AO. The certificate of non-deduction/lower rate is generally obtained by the trusts, charitable institutions and assesses who has tax payable lesser than TDS or who is having exemption and their income is subject to TDS at the end of financial year for getting relief for subsequent financial year. By obtaining the certificate assesse can obtain relief/exemption from deducting the TDS.

Provision for determination of tax amount/TDS:

Also, in case of the TDS u/s. 195 should be withheld in case of payments of interest and any other sum chargeable under the Income Tax Act (including any reimbursements) to any non-resident or foreign company at the time of credit or time of payment whichever is earlier. In such cases, deductor of tax need to make an application to AO for determining the portion to be withheld while making the payment to the payee.

Provision for non-deduction/lower rate deduction certificate in case of non-residents/foreign companies:

Any non-resident or foreign company who is entitled to receive any interest or other sum on which income tax has to be deducted u/s. 195, may make an application to the AO for the grant of a certificate authorizing him to receive such interest or other sum without deduction of tax or to get the tax deducted at a lower rate.

Procedure of applying the certificate for non-deduction or lower deduction under Income tax act:

A brief on the procedure of obtaining the certificate is as follows:

STEP 1: The assesse should submit the application (form 13 or form 15C as applicable) along with the prescribed documents to jurisdictional assessing officer;

STEP 2: After applying the application to the AO, he shall verify the estimate and proofs attached to determine the tax deductible and tax rate applicable;

STEP 3: If the AO is satisfied with the explanations & documents submitted, then he will grant the certificate requiring the deductor to either deduct the tax at a lower rate or make payment without deducting the tax.

Now after the implementation of digital era in the compliance of income tax, the application was made online and all the documents need to be uploaded for the verification of AO.

Due to the lockdown imposed by the government, it is very difficult for assessees to make application and get the relief through the certificate which will result into deduction of TDS.

In order to reduce the hardship, the Central Board of Direct taxes (CBDT) has provided with the following relief with respect to obtaining the certificate through its order 275/25/2020-IT(B) dated 31.03.2020.

Following are the different situations under which the relief are provided:

Situation A: If the Assessee holds certificate for FY 2019-20, and he makes a fresh application for FY 2020-21, and wait for the disposal on 31-3-2020

Relief: In such situation, the certificate issued for FY 2019-20 shall be valid for FY 2020-21 with respect to the transactions and deductors/collectors for whom certificate is granted in FY 2019-20 till the disposal of application by the AO. This certificate shall be valid till the AO dispose the application or before 30-06-2020 whichever is earlier.

Ex: AB Charitable Trust, Allahabad has applied and received nil TDS certificate from Jurisdictional AO with respect to TDS on interest from Andhra bank, Allahabad branch with respect to interest income on fixed deposits for FY 2019-20. The validity of the certificate obtained is FY 2019-20. They have subsequently applied for nil deduction certificate for FY 2020-21 which is pending for disposal on 31-03-2020.

In this case, the nil deduction certificate of AB Charitable Trust with respect to Interest on fixed deposit in Andhra Bank, Allahabad branch obtained for FY 2019-20 shall be valid for FY 2020-21 till the application is disposed by AO or 30-06-2020 whichever is earlier.

Situation B: If the online application (FY 2020-21) has not been filed for lower/nil deduction of TDS/TCS, but the assesse holds certificate for FY 2019-20.

Relief: In such situation, the certificate issued for FY 2019-20 shall be valid for FY 2020-21 with respect to the transactions and deductors/collectors for whom certificate is granted in FY 2019-20. However, the assesse need to apply for the certificate stating the details of transactions and deductors /collector to the AO as per procedure given below as soon as situation becomes normal or 30-06-2020 whichever is earlier.

Ex: If in the above given example, the AB charitable trust has not made an application for FY 2020-21, however they have obtained certificate for FY 2019-20 with respect to interest transaction discussed above.

In such case, the nil deduction certificate of AB Charitable Trust with respect to interest on fixed deposit in Andhra Bank, Allahabad branch obtained for FY 2019-20 shall be valid for FY 2020-21. However, the trust should make the application to AO once such situation turns normal or 30-06-2020 whichever is earlier.

Situation C: The application has not been filed for lower or nil deduction of TDS/TCS on the traces portal for FY 2020-21 and no certificate has been obtained for FY 2019-20.

Relief: A modified procedure has been prescribed as given below:

SIMPLIFIED PROCEDURE FOR OBTAINING CERTIFICATE

STEP 1: The applicant should apply for Lower/Nil deduction/collection certificate through an
E-MAIL addressed to the concerned assessing officer with the following documents as annexures:

1. Duly filled form 13

2. Projected Balance sheet and Profit & Loss account for FY 2020-21

3. Provisional Balance sheet and Profit & Loss account for FY 2019-20

4. Balance sheet Profit & Loss account for FY 2018-19

5. Form 26AS for FY 2019-20 and FY 2018-19

6. ITR for the FY 2018-19

7. Any other documents that are required to be uploaded along with form 13 in traces portal

Note: With respect to Nil/lower deduction of tax u/s. 195(2) & 195(3), the process of furnishing applications will be generally filed, however, Government has given the comfort that applications need to be submitted via email and certificates will be issued via email.

STEP 2: The AO will verify the application and issue the certificate in the prescribed format to the email of applicant.

STEP 3: The issuance of certificate shall be communicated by the applicant to the deductor or collector

By following the above procedure, we can easily obtain the Nil/lower deduction certificate.

Situation D: In case payments to a non-resident or foreign company having Permanent establishment in India and not covered under Situation A or Situation B above, payment shall be made by deducting TDS @10% (including surcharge and cess) till 30-06-2020 or disposal of applications whichever is earlier.

Conclusion:

It is a welcomed procedure by CBDT where the application can be made anywhere through an email and certificate will be issued in a simplified manner by AO. This will eliminate the privation faced by the assesse and will ease in compliance in hard times. Hoping the situation turn to status quo soon.

Recent FM Press Release Details in which Relaxation in the field of Taxation, Finance and Law been announced-

Dated Link
24.03.2020 FM relaxes Tax & Regulatory Compliance in view of COVID-19 outbreak
26.03.2020 Finance Minister announces Rs 1.70 Lakh Crore relief package
31.03.2020 FM Releases Ordinance on relaxation Provided on 24th March 2020
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