TDS-TCS PROVISIONS: With a view to increase the database of persons coming under tax net and to collect more taxes timely by way of deduction of tax at source, government has introduced new provisions relating to TDS and has amended certain existing provisions. In order to boost the economy by way of introduction of foreign capital, the concessional rate of TDS u/s 194LC of the Act has been extended till 01.07.2020. Similarly, in order to enhance the investment of FIIs and QFIs in government securities and rupee denominated bonds the concessional rate of TDS has been extended till 01.07.2020.
206CC Requirement to furnish PAN by Collectee:
In order to strengthen the PAN mechanism and in order to increase the database of persons for tax purposes, a new Section 206CC has been introduced vide which any person responsible for paying any amount on tax is collectible at source shall furnish his PAN to the person responsible for collecting such tax. In case no PAN is furnished, tax shall be collected at twice the rate mentioned in the relevant provisions of TCS or at the rate of 5%, whichever is higher.
New Section 194IB:
Currently, there is no provision to deduct tax on rent by individuals and HUFs which are not liable to audit u/s 44AB. A new Section 194IB is proposed to be inserted w.e.f. 01.06.2017 wherein a person [though he is not liable to audit] who is liable to pay rent to an Indian resident for use of any land or building or both exceeding R50,000/-, for a month or part of a month, shall deduct TDS at rate of 5%. The necessity of obtaining a TAN has been done away with and that TDS is to be done only once in a previous year per tenancy.
In a scenario where the deductee does not furnish his PAN to the deductor or the PAN furnished by him is invalid, the TDS which has to be done at a higher rate [20%] shall be restricted to amount of rent payable for the last month of the previous year or the last month of tenancy.
Due to introduction of this section, the tax authorities should be able to track whether all the receivers of rent are paying their due income tax and filing returns as per law. Additionally, due to exchange of information between income tax and service tax departments, the service tax department should also be able to track whether the person receiving the rent is registered under service tax and is duly complying with service tax liabilities.
Read More details about [TDS on Rent by Individual/HUF]
A new Section 194IC has been introduced w.e.f. 01.04.2017 which provides that TDS @ 10% shall be made in case of payment of consideration by [not being consideration in kind] pursuant to a joint development agreement [JDA] by the developer to the land owner. This section specifically starts with a non-obstante clause w.r.t. Section 194-IA thereby meaning that TDS on consideration relating to JDA shall be governed by 194-IC only and not by 194-IA.
It is pertinent to note here that the event of TDS occurs at the time of payment of monetary consideration though the taxation of capital gains u/s 45(5A) is deferred till the receipt of certificate of completion. Thus there will be a mismatch in Form
26AS in each case related to a JDA wherein TDS on monetary portion of consideration would appear in one assessment year and the same consideration is taxable under capital gains in some future year.
Further, as per Section 198, all sums deducted in accordance with provisions of chapter of TDS are deemed to be income received. A query which arises here is that, if TDS on monetary part is included as income of a previous year as per Section 198, and if as per Section 45(5A) stamp duty value as increased by gross consideration received in cash is to be treated as ‘full value of consideration’, will there be a double taxation to the extent of amount of TDS which already included as income? [Note: Section 48 where the term ‘full value of consideration’ is used, is applicable in context of all sub-Sections of Section 45] The Budget 2017 has increased the scope and powers of Taxmen and has in some cases even reduced their accountability towards taxpayers. The provisions regarding TDS and TCS seek to widen the tax-net and to bring more and more people under the tax database. The gradual reduction in time-limits for completion of assessments is a positive step resulting in overall period of cases being reaching finality.
CA. Sahil Garud
The author is a member of the Institute. He can be reached at ca.sahilgarud@ gmail.com.)