TDS, TCS Compliances & Impact of Covid-19 Thereon

In this article we will discuss in detail about Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) along with updated TDS Rate Chart and TCS Rate rate chart amidst the outbreak of COVID-19 and lockdown:

TDS Compliances And Impact of Covid-19 Thereon

• TDS Deductor and Deductee

TDS is basically income tax deducted by a person while making certain specified payments such as rent, commission, salary, professional fees, interest etc. The person making the payments is required to deduct the tax and deposit it with the Government.

The person who deducts the tax is called deductor and the person whose tax is deducted is called deductee.

• Point of TDS deduction

The TDS should be deducted at specified rates while making the payment or date of credit which ever is earlier.

• Person responsible for deducting TDS

TDS should be deducted by every person making the specified payments except by individual and HUF whose books are not required to be audited. However, in case of rent payments made by individuals and HUF exceeding Rs 50,000 per month, are required to deduct TDS @ 5% even if the individual or HUF is not liable for a tax audit.

• TAN

Every Person Deducting/Collecting tax at source is required to obtain a unique number called as Tax Deduction Account Number (TAN). The Number has to be quoted to the deductor/collector in every correspondence related to TDS/TCS.

• Due date for depositing TDS

The tax deducted at source must be deposited by 7^th day of subsequent month. For the Tax deducted in month of March the due date for deposit is 30^th April.

• Form and frequency for issuance of TDS certificate

Form	Certificate of	Frequency	Due date
Form 16	TDS on salary payment	Yearly	31st May*
Form 16 A	TDS on non-salary payments	Quarterly	15 days from due date of filing return
Form 16 B	TDS on sale of property	Every transaction	15 days from due date of filing return
Form 16 C	TDS on rent	Every transaction	15 days from due date of filing return

 *Amidst outbreak of corona Pandemic and lockdown, the due date for filing returns has been extended till 30^th June, 2020 for due dates falling between 20.03.2020 to 30.06.2020.

•  Challan to be filled for payment of TDS

The TDS needs to be deposited by filling Challan ITNS-281.

• Due date for TDS returns be filing

The TDS returns needs to be filed as per below chart.

Form No	Transactions reported in the return	Due date
Form 24Q	TDS on Salary	Q1 – 31st July Q2 – 31st October Q3 – 31st January Q4 – 31st May*
Form 27Q	TDS on all payments made to residents except salaries	Q1 – 31st July Q2 – 31st October Q3 – 31st January Q4 – 31st May*
Form 26QB	TDS on sale of property	30 days from the end of the month in which TDS is deducted
Form 26QC	TDS on rent	30 days from the end of the month in which TDS is deducted

*Amidst outbreak of corona Pandemic and lockdown, the due date for filing returns has been extended till 30^th June, 2020 for due dates falling between 20.03.2020 to 30.06.2020.

• Form 26AS and TDS credit:

Form 26AS is a consolidated tax statement which is available to all PAN holders. Since all TDS is linked to assessee’s PAN, this form lists out the details of TDS deducted on your income by each deductor for all kinds of payments made to assessee – whether those are salaries or interest income – all TDS linked to assessee’s PAN is reported here. This form also has income tax directly paid by assessee – as advance tax or self assessment tax.

• Procedure to claim credit for TDS deducted

Assessee would be required to calculate his annual income by aggregating income from all sources. The actual tax liability would be calculated on the total taxable income.

From the taxes calculated, assessee can claim credit for TDS deducted on various receipts. Reduce the tax deducted at source from actual tax liability to know the balance to be paid to the income tax department. Assessee may have a refund too. In both cases, an income tax return needs to be filed and tax due be paid or refund if any be claimed.

• The Consequences of TDS Defaults And Non-Payment To Government

Failure to deduct tax or short deduction of tax or failure/delay in payment of the tax deducted to the credit of Government by the due date, would make the deductor an assessee in default in respect of such tax and also liable to penalty which is equal to the amount for which the assessee is a deemed defaulter.

In case of non-deduction/short deduction or delay in deduction of tax, interest @ 1% per month or part of the month is levied on the fix deductible amount and in case of delay in payment of tax after deducting, interest @ 1.5% per month or part of the month, till such time the tax deducted is not credited to the Government shall also be payable.

*Note – Amidst lockdown the rate of interest is reduced to 0.75% for delayed deduction and payment for due dates falling between 20.03.2020 to 30.06.2020.

• What if the Pan no. is not provided to the deductor by the deductee? Is there any relief amidst the COVID-19 outbreak and lockdown?

If the deductee does not furnish PAN or furnishes incorrect PAN to the deductor/collector, the deductor/collector shall deduct tax at source at higher of the following rates:

• the rate prescribed in the Act; or
• at the rate in force, i.e.. the rate mentioned in the Finance Act; or
• at the rate of 20%.

There shall be no reduction in rates of TDS or TCS, where the tax is required to be deducted or collected at higher rate due to non-furnishing of PAN/Aadhaar.  For example, if the tax is required to be deducted at 20% under section 206AA of the Income-tax Act due to non-furnishing of PAN/Aadhaar, it shall be deducted at the rate of 20% and not at the rate of 15%.

• Rates of deduction and relief provided to cope up with COVID – 19 pandemic

 In order to provide more funds at the disposal of the taxpayers for dealing with the economic situation arising out of COVID-19 pandemic, the rates of Tax Deduction at Source (TDS) for  the following non-salaried specified payments made to residents has been reduced by 25% for the period from 14^th  May, 2020  to 31^st March, 2021:- 

Section	Nature of payment	Threshold Limit	Applicable from 01/04/2020 to 13/05/2020		Applicable from 14/05/2020 to 31/03/2021
			Re sident	Non-re sident  *	Re sident	Non-re sident *
		Rs.	TDS Rate (%)	TDS Rate (%)	TDS Rate (%)	TDS Rate (%)
192	Salaries	–	Normal slab rate	Normal slab rate	Normal slab rate	Normal slab rate
192A	Premature withdrawal from EPF	50000	10	10	10	10
193	Interest on securities – 8% Savings (Taxable) Bonds, 2003 or 7.75% Savings (Taxable) Bonds, 2018 during the financial year	10000	10	–	7.5	–
193	Interest on securities – Interest on securities for money issued by or on behalf of any local authority/statutory corporation, listed debentures of a company(other than demat form), any other interest on securities	5000	10	–	7.5	–
194	Dividends	5000	10	–	7.5	–
194A	Interest (Banking co., co-operative society engaged in banking, post office)	40000	10	–	7.5	–
194A	Interest (Any other person)	5000	10	–	7.5	–
194B	Winning from lotteries	10000	30	30	30	30
194BB	Winning from Horse race	10000	30	30	30	30
194C	Contractor-Single transaction-Individual/HUF -Others	30000	1 2	– –	0.75 1.5	– –
194C	Contractor – Consolidated Payment During the F.Y. – Individual/HUF – Others	100000	1 2	– –	0.75 1.5	– –
194D	Insurance commission – Other than Company – Company	15000	5 10	– –	3.75 10	– –
194DA	Maturity of Life insurance policy	100000	5	–	3.75	–
194E	Non-resident sportsmen or sports association	–	–	20	–	20
194EE	NSS	2500	10	10	7.5	10
194F	Repurchase units by MFs	–	20	20	15	20
194G	Commission-Lottery	15000	5	5	3.75	5
194H	Commission/ Brokerage	15000	5	–	3.75	–
194I	Rent of – Plant/Machinery /Equipment – Land and Building/Furniture & Fixture	240000	2 10	– –	1.5 7.5	– –
194IA	Transfer of certain immovable property other than agriculture land	50 lakh	1	–	0.75	–
194IB	Rent by Individual/HUF	50000 per month	5	–	3.75	–
194IC	Payment under Joint Development Agreements to Individual/HUF	–	10	–	7.5	–
194J	Professional Fees	30000	10	–	7.5	–
194J	Technical Fees (w.e.f. 01.04.2020)	30000	2	–	1.5	–
194J	Payment to call centre operator (w.e.f. 01.06.2017)	30000	2	–	1.5	–
194J	Director’s fees	–	10	–	7.5	–
194K	Payment of any income in respect of (a) units of a mutual fund as per section 10(23D); or (b) the units from the administrator; or (c) units from specified company (w.e.f. 01.04.2020)	5000	10	–	7.5	–
194LA	Compensation on transfer of certain immovable property other than agriculture land (TDS exempted if covered under RFCTLARR Act w.e.f. 01.04.2017)	250000	10	–	7.5	–
194LB	Income by way of interest from infrastructure debt fund	–	–	5	–	5
194LBA	Income from units of business trust – interest received or receivable from a special purpose vehicle; or – dividend referred to in sub-section (7) of section 115-O	–	10 10	5 10	7.5 7.5	5 10
194LBA	Distribution of rental income to unit holders – Other than Comapany – Company	–	10 10	30 40	7.5 7.5	30 40
194LBB	Income in respect of units of investment fund – Other than Company – Company	–	10 10	30 40	7.5 7.5	30 40
194LBC	Income in respect of investment in securitization fund – Individual/HUF – Company – Other Person	–	25 30 30	30 40 30	18.75 22.5 22.5	30 40 30
194LC	Income by way of interest by an Indian specified company to a non-resident/foreign company on foreign currency approved loan / long-term infrastructure bonds from outside India	–	–	5	–	5
194LC	Income by way of interest by an Indian specified company on rupee denominated bond / any long-term bonds from outside India, which is listed only on a recognized stock exchange located in any International Financial Services Centre	–	–	4	–	4
194LD	Interest on certain bonds from Govt. securities	–	–	5	–	5
194M	Certain payments by Individual/HUF	50 lakh	5	–	3.75	–
194N	Payment of certain amount in cash	1 Crore	2	2	2	2
194N	Payment of certain amount in cash (first proviso of section 194N)if- –  Amount is more than Rs.20 lakh but up to Rs. 1 crore –  Amount exceeds Rs. 1 crore (Applicable from 01.07.2020)		N.A. N.A.	N.A. N.A.	2 5	2 5
194-O	Applicable for e-commerce operator for the sale of goods or provision of services facilitated by it through its digital or electronic facility or platform (Applicable from 01.10.2020)	–	N.A	–	0.75	–
195	Income of Investment made by an NRI	–	–	20	–	20
195	Long-term capital gain – Under Section – 115E/ 112(1)(c)(iii)/112A – Any Other Gains	–	– –	10 20	– –	10 20
195	Short-term capital gain – 111A	–	–	15	–	15
195	Royalty	–	–	10	–	10
195	Fees for technical services	–	–	10	–	10
195	Interest income payable by Govt./Indian concern (other than section 194LB or 194LC)	–	–	20	–	20
195	Any Other Income – Other than Company – Company	–	– –	30 40	– –	30 40
196A	Income in respect – – of units of a Mutual Fund specified under clause (23D) of section 10; or – from the specified company referred to in the Explanation to clause (35) of section 10	–	–	20	–	20
196B	Income from units to an offshore fund	–	–	10	–	10
196C	Income from foreign currency bonds or GDR of an Indian company	–	–	10	–	10
196D	Income of foreign Institutional Investors from securities (not being dividend or capital gain)	–	–	20	–	20

TCS Compliances And Impact of Covid-19 Thereon

• TCS, Collector, Collectee

TCS is Tax collected at source from the buyer by the seller at the time of selling some prescribed goods. The person who collects the tax is called ‘collector’ and the person whose tax is collected is called ‘collectee’.

• Persons to collect tax at source

There are some specific people or organizations who have been classified as sellers for tax collected at source. No other seller of goods can collect tax at source from the buyers apart from the following list :

1. Central Government

2. State Government

3. Local Authority

4. Statutory Corporation or Authority

5. Company registered under Companies Act

6. Partnership firms

7. Co-operative Society

8. Any person or HUF who is subjected to an audit of accounts under Income tax act for a particular financial year.

Similarly, only a few buyers are liable to pay the tax at source to the sellers.

Let us know who are those buyers:

1. Public sector companies

2. Central Government

3. State Government

4. Embassy of High commision

5. Consulate and other Trade Representation of a Foreign Nation

6. Clubs such as sports clubs and social clubs

• The due date for depositing TCS with the government

The tax collected at source must be deposited by 7^th day of subsequent month.

TCS certificate 

When a tax collector files his quarterly TCS return i.e  Form 27EQ, he has to provide a TCS certificate to the purchaser of the goods.

Form 27D is the certificate issued for TCS returns filed. This certificate contains the following details:

1. Name of the Seller and Buyer

2. TAN of the seller i.e who is filing the TCS return quarterly

3. PAN of both seller and buyer

4. Total tax collected by the seller

5. Date of collection

6. The rate of Tax applied

This certificate has to be issued within 15 days from the date of filing TCS quarterly returns.

• Due date for TCS return filing

The due dates for return filing in as per chart given below –

Quarter	Period	Due Date of filing
1st Quarter	1st April to 30th June	15th July
2nd Quarter	1st July to 30th September	15th Oct
3rd Quarter	1st Oct to 31st Dec	15th Jan
4th Quarter	1st Jan to 31st March	15th May***

***Amidst outbreak of corona Pandemic and lockdown, the due date for filing returns has been extended till 30^th June, 2020 for due dates falling between 20.03.2020 to 30.06.2020.

• Consequences Of TCS Defaults And Non-Payment To Government?

In case of delay in payment of tax after collecting, interest @1% per month or part of the month till such time the tax is not paid.

*Note – Amidst lockdown the rate of interest is reduced to 0.75% for delayed deduction and payment for due dates falling between 20.03.2020 to 30.06.2020.

• Penalties and prosecution for default in compliance with TDS or TCS rules?

Penalty (Sec 234E): The TDS deductor will be accountable to pay a penalty of INR 200/- per day to the IT department till the date the complete TDS amount is being paid. However, the penalty shall be limited to the actual TDS amount and cannot be more than that.

Penalty u/s 271H – As per this section, when an individual fails to file the TDS/TCS return before the due dates, the Assessing Officer may direct him/her to pay penalty under section 271H along with the late fee applicable as per section 234E.

The penalty under section 271H starts from INR.10,000 and can be extended to INR 1,00,000 when the Deductor/Collector files a wrong return.

Conditions when no penalty is levied for delayed filing or payment of TDS/TCS return as per section 271H.

• The tax deducted at source is paid to the credit of the government.
• The interest along with late filing fees is paid to the credit of the government.
• The TDS/TCS return is filed prior to the expiry of one year period from the due date as stated (provided that the return submitted is correct)

Prosecution under Section 276B

Section 276B states that if a person fails to pay to the credit of the Central Government within the specified time, as mentioned above, the TDS by him according to the provisions of Chapter XVII-B, he shall be penalized with fine along with severe imprisonment for a time period between 3 months and 7 years. The punishment will be based upon the circumstances or the inspection done by the concerned tax authority or assessment officer.

• The rates of collection and relief provided to cope up with COVID – 19 pandemic?

 In order to provide more funds at the disposal of the taxpayers for dealing with the economic situation arising out of COVID-19 pandemic, the rates of Tax Deduction at Source (TDS) for  the following non-salaried specified payments made to residents has been reduced by 25% for the period from 14^th  May, 2020  to 31^st March, 2021:-

TCS Rate Chart for F.Y. 2020-21 (A.Y: 2021-22)

Section	Nature of payment	Applicable from 01/04/2020 to 13/05/2020 TCS Rate (%)	Applicable from 14/05/2020 to 31/03/2021 TCS Rate (%)
206C	Scrap	1	0.75
206C	Tendu leaves	5	3.75
206C	Timber obtained under a forest lease or other mode	2.5	1.875
206C	Any other forest produce not being a timber or tendu leaves	2.5	1.875
206C	Alcoholic liquor for human consumption and Indian made foreign liquor	1	1
206C	Parking lot, toll plaza, mining and quarrying (other than mining and quarrying of mineral oil, petroleum and natural gas)	2	1.5
206C	Minerals, being coal or lignite or iron ore	1	0.75
206C	Sale of motor vehicle of the value exceeding Rs. 10 Lacs	1	0.75
206C	Remittance out of India under the Liberalized Remittance Scheme of the RBI of the value exceeding 7 Lacs in a financial year (Applicable from 01.10.2020) – TCS will be charged on excess amount over 7 lacs	N.A.	5
206C	Sale of overseas tour programme package (Applicable from 01.10.2020)	N.A.	5
206C	Remittance out of India for education under the Liberalized Remittance Scheme of the RBI of the value exceeding 7 Lacs in a financial year (Applicable from 01.10.2020) – TCS will be charged on excess amount over 7 lacs	N.A.	0.5
206C	Sale of any goods (other than goods exported out of India or goods given in the above points) of the value exceeding 50 Lacs (Applicable from 01.10.2020) – TCS will be charged on excess amount over 50 lacs	N.A.	0.075

Note: In case of non-furnishing of PAN/Aadhaar by collectee, TCS will be charged at twice of the normal rate applicable or 5% {1% in case of sale of any goods (given in the last point) of the value exceeding 50 Lacs}, whichever is higher.

Hope you found the article helpful.

(The author is a Chartered Accountant and can be reached at cagulshanzade@gmail.com)