Clarification in relation to notification issued under clause (v) of proviso to section 194N of the Income-tax Act, 1961 (the Act) prior to its amendment by Finance Act, 2020 (FA, 2020)
Circular No. 14/2020 was issued by the Central Board of Direct Taxes on 20 July 2020. Its subject is Clarification in relation to notification issued under clause (v) of proviso to section 194N of the Income-tax Act, 1961 (the Act) prior to its amendment by Finance Act, 2020 (FA, 2020).
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.
Keeps alive the three exemption notifications issued under clause (v) of the proviso to section 194N after the Finance Act, 2020 restructured that section. Those notifications, covering cash replenishment agencies and franchise agents of white label ATM operators (Notification 68 of 2019 dated 18 September 2019), commission agents and traders operating under an APMC and registered under the State agricultural produce market law (Notification 70 of 2019 dated 20 September 2019), and authorised dealers, their franchise and sub-agents and RBI-licensed full fledged money changers and their franchise agents for buying foreign currency from visiting tourists and non-residents or returning residents and for disbursing inward remittances in cash under the Money Transfer Service Scheme (Notification 80 of 2019 dated 15 October 2019), are deemed to be issued under the fourth proviso to section 194N as amended. The conditions in each notification continue to apply.
The Finance Act, 2020 recast section 194N and moved the exemption power from clause (v) of the proviso to the fourth proviso, and representations were received asking whether the earlier notifications survived that change.
F. No. 370142/27/2020-TPL Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes (TPL Division) **** Circular no. 14/2020 Room no. 147B-II, North Block, New Delhi, dated 20th July, 2020 SUbject: Clarification in relation to notification issued under clause (v) of proviso to section 194N of the Income-tax Act, 1961 (the Act) prior to its amendment by Finance Act, 2020 (FA, 2020)-Reg.
Section 194N of the Act as inserted by Finance (No.2) Act 2019 provided for deduction of tax at source on payment made by a banking company, a cooperative society engaged in the business of banking or post office, in cash to a recipient exceeding Rs. I crore in aggregate during a financial year from one or more account maintained by such recipient. Clause (v) of proviso to the said section had empowered the Central Government, in consultation with the Reserve Bank of India (RBI), to exempt by way of notification in Official Gazette, persons or class of persons so that payments made to such persons or class of persons shall not be subjected to TDS under this section. Accordingly, in exercise of the said power, Central Government has issued three notifications which are as under:
(a) Notification 68 of 2019 dated 18.09.2019: Cash Replenishment Agencies (CRAs) and franchise agents of White Label Automated Teller Machine Operators (WLATMOs) for the purpose of replenishing cash in ATMs operated by these entities subject to conditions mentioned in the said notification
(b) Notification 70 of 2019 dated 20.09.2019: Commission agent or trader operating under Agriculture Produce market Committee (APMC) and registered under any law relating to Agriculture Produce Market of the concerned State have been exempted subject to conditions specified in the said notification
(c) Notification 80 of 2019 dated 15.10.2019: the authorized dealer and its franchise agent and sub-agent and Full Fledged Money Changer (FFMC) licensed by the Reserve Bank of India and its franchise agent for the purposes oj,-
(i) Purchase of foreign currency from foreign tourists or non-residents visiting India or from resident Indians on their return to India, in cash as per the directions or guidelines issued by Reserve bank of India; or
(ii) Disbursement of inward remillances to the recipient benefiCiaries in India in cash under Money Transfer Service Scheme (MFSS) of the Reserve Bank of India; and subject to the conditions specified in the said notification.2. Section 194N of the Act was amended by the Finance Act, 2020 (the FA, 2020) in order to make the provisions of the said section more stringent for non ITR filers. It is to note that the clause (v) of the proviso to section 194N prior to its amendment has now become fourth proviso to the said section. Representations have been received seeking clarification regarding the validity of the above mentioned notifications in light of the amendments carried out by FA, 2020.
3. The matter has been examined by the Board and it is hereby clarified that the above mentioned three notifications shall be deemed to be issued under fourth proviso to section 194N as amended by the FA, 2020. It is further reiterated that the exemption allowed under the said notifications shall be subject to the conditions laid down therein.
Copy to:
1. PS to FM/PS to MoS(F)
2. OSD to Secretary (Finance)
3. The Chairman and all Members, CBDT
4. All Pro DGsIT/Pr. CCslT
5. All Joint Secretaries/CsIT, CBDT
6. Directors/Deputy Secretaries/Under Secretaries ofCBDT
7. The C&AG oflndia (30 copies)
8. The JS & Legal Adviser, Ministry of Law & Justice, New Delhi
9. The Institute of Chartered Accountants of India
10. CIT (M&TP), Official Spokesperson ofCBDT
11. % Pro DGiT (Systems) for uploading on official website
12. JCIT (Database Cell) for uploading on departmental website
You meet it when a bank proposes to deduct tax under section 194N on cash withdrawals by an APMC commission agent, an ATM cash replenishment agency or a money changer, and the customer relies on one of the 2019 notifications.
It mentions. Circular No. 14/2020
Source: the Income Tax Department’s own published text — its page for this instrument.