Clarification regarding short deduction of tds/tcs due to increase in rates of surcharge by finance no. 2 act 2019
Circular No. 8/2020 was issued by the Central Board of Direct Taxes on 13 April 2020. Its subject is Clarification regarding short deduction of tds/tcs due to increase in rates of surcharge by finance no. 2 act 2019.
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.
Protects deductors and collectors from being treated as assessees in default for the shortfall caused by the surcharge increase made by the Finance (No. 2) Act, 2019. That Act raised the surcharge from 15 per cent to 25 per cent where income is between two and five crore rupees and to 37 per cent where it is five crore rupees and above, with effect from 1 April 2019 for previous year 2019-20. Where the transaction was completed and the entire payment made to the payee on or before 5 July 2019, with no subsequent transaction in financial year 2019-20 from which the shortfall could have been recovered, and the deductor deducted or collected at the pre-amendment rates, deposited that tax by the due date and furnished the statement by its due date, he is not to be treated as an assessee in default. Where the shortfall was in fact deducted or collected later out of subsequent transactions, no interest is to be levied for the delay. Failure on any of the four conditions takes the case out of the circular.
Several cases came to the notice of the Central Government where deductors and collectors were held to be assessees in default for short deduction on transactions completed before the Finance (No. 2) Bill, 2019 was laid in Parliament on 5 July 2019, and it was requested that they not be so treated since the enhanced rates were not then known.
| Under the 1961 Act | Now |
|---|---|
| s.20 | no counterpart recorded |
F. No. 370133/S/2020-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(TPL Division)
*****
Circular No. 8/2020
Room No. 147B-II, North Block, New Delhi
Dated 131h April, 2020
Subject: Clarification regarding short deduction ofTDSITCS due to increase in rates of surcharge
by Finance (No.2) Act, 20l9-reg.
The Finance (No.2) Bill,20 19 was tablcd in Lok Sabha on 51h July, 2019 which was passed by
both the houses of Parliament and became Finance (No.2) Act, 2019 (the Act) which received assent of
the President on l SI August, 2019. The Act provided for increase in the rate of surcharge as under:
S. Income slab Surcharge Enhanced surcharge as
No. before the Act providcd by thc Act
I Less than 50 lakh rupees Nil Nil
2 50 lakh rupees but less than I crorc rupees 10% 10%
3 I crore rupees but less than 2 crore rupees 15% 15%
4 2 crore rupees but less than 5 crorc rupees 15% 25%
5 5 crore rupees and above 15% 37%2. The enhanced rates of surcharge were applicable from the I SI day of April, 2019 for previous year
2019-20 relevant to assessment year 2020-21. Thus, every person as referred to above was required to
compute his tax liability after taking into account the enhanced rates of surcharge. Furthcr, TDS/TCS
under various provisions of the Income-tax Act is rcquired to be deducted! collected after taking into
account the enhanced rate of surcharge.3. Several cases have come to the notice of thc Central Government wherein dcductorsl collectors
wcre held to be an asscssee in default for short deduction of TDS/short collection of TCS in cascs where
final transaction was done before laying of the Financc (No.2) Bill, 2019 in the Parliament, i.e. 51h July,
2019. Since the transaction was complctcd before the rates of enhanced surcharge werc announced and
the concerncd deductee/payee is required to furnish their Income-tax return for tbe relevant assessment
year, it has bccn requested that in such cases, deduct or or collector should not be held to be an assessee in
default under section 20 I of the Income-tax Act.4. The above issue has been examined by the Board and in this regard, it is clarified a person
responsible for deduction/collection of tax under any provision of the Income-tax Act will not be
considered to be an assessee in default in respect of transactions where:-
a) such transaction has been completed and entire payment has been made to the deductee/payee on
or before 5th July, 2019 and there is no subsequent transaction between the deductor/collector and
the deductee/payee in the financial year 2019-20 from which the shortfall of tax could have been
deducted/collected by the deductor/collector;
b) TDS has been deducted or TCS has been collected by such deductor/collector on such sum as per
the rates in force as per the provisions prior to the enactment of the Act;
c) such tax deducted or collected has been depositcd in the account of Central Government by the
deductor/collector on or before tbe due date of depositing the same;
d) TDSITCS statement has been furnished by such person on before the due date of filing oftbe said
statement.5. However, if the person fails to fulfill any of the conditions as laid down above, such a person
will, witb respect to short deduction/collection, not be eligible for benefit provided under this circular.6. Further, if the deductor/collcctor has dcductcd/collected shortfall of tax after 5
1h of July, 2019
from the transaction(s) made subsequently aftcr the said date, interest, if any, for delay in
deduction/collection of such tax shall not be levied.7. The above relaxation does not absolve the deductee/payee to pay proper tax including enhanced
surcharge by advance tax or self-assessmcnt tax and file return of income after paying such tax.8. This issues with the approval of Finance Minister.
Copy to:
I. PS to FMlOSD to FMlPS to MoS (F)/ OSD to MoS (F)
2. PS to Secretary (Revenue)
3. Chairman, CBDT & all Members, CBDT.
4. All Pr. DGsIT/Pr. CCsIT/ DGslT/CCslT
~~~ (Ankit Jain)
Dy. Commissioner of Income-tax (OSD)
TPL Division
5. All Joint Secretaries/ CsIT/ Directors/Deputy Secretaries/Under Secretaries ofCBDT
6. The C&AG oflndia (30 copies)
7. The JS and Legal Advisor, Ministry of Law and Justice, New Delhi
8. CIT (M&TP), Official Spokesperson of CBDT
9. O /0 Pr. DGIT (System) for uploading on official website
10. JCIT (Database Cell) for uploading on www.irsofficersonline.gov.in(Ankit Jain)
Dy. Commissioner of Income-tax (OSD)
TPL Division
In an order under section 201(1) and section 201(1A) for short deduction in financial year 2019-20 traced to the surcharge increase.
A company pays a resident consultant his entire fee on 20 June 2019 and deducts tax computed with surcharge at 15 per cent, the consultant's income for the year being above five crore rupees so that 37 per cent was ultimately due. If there is no further payment to him in financial year 2019-20, the tax deducted was deposited on time and the statement was filed on time, the company is not an assessee in default for the shortfall, though the consultant must pay the enhanced surcharge himself.
It mentions. Circular No. 8/2020
Source: the Income Tax Department’s own published text — its page for this instrument.