Section 194A l Interest Other Than "Interest on Securities"
Circular No. 716 was issued by the Central Board of Direct Taxes on 9 August 1995. Its subject is Section 194A l Interest Other Than "Interest on Securities".
This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.
Explains the widened tax deduction at source net created by Finance Act, 1995, which amended sections 194A and 194C and inserted sections 194J and 194K. Deduction is now to be made from fees for professional and technical services of Rs. 20,000 and above, from contract payments of Rs. 20,000 and above for advertising, broadcasting, telecasting, transport of goods and passengers and catering, from interest of Rs. 10,000 and above on time deposits with a bank branch, and from income of Rs. 10,000 and above from units of Mutual Funds or of the Unit Trust of India. It lists the consequential form changes: Form No. 13 and Form No. 15AA extended to income in respect of units, Form No. 15H for declarations under section 197A(1A) extended to unit income, Form No. 16A extended to professional or technical fees and unit income, Form No. 26 extended to unit income, and a new Form No. 26K as the annual return under section 206 for professional or technical fees. Assessing Officers are told to dispose of applications for non-deduction or lower deduction at the earliest, to keep the forms available at income-tax offices, bank counters, post offices and UTI counters, and to redress grievances promptly.
The changes were likely to affect a large number of persons, some of whom had no taxable income, and the Board wanted the new provisions implemented without hardship or inconvenience to the public.
SECTION 194A l INTEREST OTHER THAN "INTEREST ON SECURITIES"
1054. Clarifications regarding sections 194A, 194C, 194J and 194K, as amended/inserted by the Finance Act, 1995
The Finance Act, 1995, has enlarged the ambit of deduction of tax at source by amending sections 194A and 194C of the Income-tax Act, 1961, and by inserting sections 194J and 194K in the Act. As a result of these changes, deduction of tax at source is also required to be made from :—
(i) payments of Rs. 20,000 and above made by way of fees for professional and technical services;
(ii) payments in pursuance of contracts of Rs. 20,000 and above for advertising, broadcasting, telecasting, transport of goods and passengers and catering;
(iii) payments of interest of Rs. 10,000 and above on Time Deposits with a bank branch; and
(iv) income of Rs. 10,000 and above from units of Mutual Funds or of the Unit Trust of India.
The changes are likely to affect a large number of persons some of whom may not have taxable income. Persons having income below taxable limit may apply to the Assessing Officers for issue of certificates for non-deduction of tax. There may also be cases where assessees may apply for deduction of tax at a lower rate. Provision has also been made for making suo motu declarations to the payers for non-deduction of tax from interest on time deposits and income in respect of units.
2. In pursuance of the aforesaid new provisions, necessary amendments in the Rules and Statutory Forms have been carried out. These rules/forms primarily pertain to deduction of tax at lower rate, non-deduction of tax, filing of declaration by a person to the payer, payment of tax to the Government by the deductors, and filing of annual returns, etc. The details of forms amended or inserted in the Income-tax Rules, in this behalf, are indicated below :—Sl. No.
Form No.
Subject
Remarks
1.
13
Application by a person for a certificate under section 197(1) for no deduction of tax or deduction at lower rates.
Amended to include income in respect of units.
2.
15AA
Certificate by the Assessing Officer under section 197(1)
- do –
3.
15H
Declaration under section 197A- (1A) for claiming receipt of interest other than "interest on securities" and income in respect of units.
Amended to include income in respect of units.
4.
16A
Certificate of deduction of tax at source under section 203
Amended to include fees for professional or technical services and income in respect of units.
5.
26
Annual return of deduction of tax from dividends/income in respect of units under section 206.
Amended to include income in respect of units.
6.
26K
Annual return of deduction of tax from fees for professional or technical services under section 206.
Inserted in view of section 194J.
3. Instructions have been issued to the Assessing Officers that the amended provisions relating to tax deduction at source are implemented in such a manner that they do not cause any hardships or inconvenience to the members of public. The taxpayers and others are advised to approach the tax authorities for issue of certificates of non-deduction or deduction of tax at a lower rate, as the case may be, who in turn, have been directed that :
(i) an application received for non-deduction of tax or deduction of tax at a lower rate should be disposed off at the earliest;
(ii) the requisite forms of declaration to the payer or for issue of certificate of non-deduction of tax or deduction of tax at lower rate, etc., should be made available in the income-tax offices, bank counters, post offices, UTI counters, etc.; and
(iii) the grievances, if any, relating to the implementation of provisions of tax deduction at source should be redressed promptly.
4. If a person has any difficulty in the matter, he may approach the Chief Commissioner of Income-tax concerned for redressal of the grievance. If necessary, he may also approach Director (Hqrs.), Central Board of Direct Taxes, North Block, New Delhi-110001.Circular : No. 716, dated 9-8-1995.
In an order under section 201 for short deduction on professional fees or contract payments of that period, or where a bank is asked why no tax was deducted on time deposit interest.
A partnership pays an advertising agency Rs. 25,000 in 1995-96. Because the payment is a contract payment for advertising of Rs. 20,000 or more, section 194C as amended applies and tax must be deducted, the certificate going to the agency in Form No. 16A. If the agency's income is below the taxable limit, its remedy is to obtain a certificate under section 197(1) in the manner covered by Form No. 13, not simply to ask the payer not to deduct.
Source: the Income Tax Department’s own published text — its page for this instrument.
