New TDS & TCS Provisions: Updates on Tax Deduction and Collection

TDS & TCS Provisions TDS & TCS Provisions Aarti Raote Partner Deloitte India

TDS & TCS Provisions Stamp duty value should be considered for TDS under Section 194-IA Under existing provisions, tax is to be deducted on the amount of consideration paid by the transferee to the transferor. This does not take into account the stamp duty value of the immovable property. The Budget proposes to amend the section 194-IA of the Act to provide that in case of transfer of an immovable property (other than agricultural land), tax is to be deducted at the rate of one per cent of such sum paid or credited to the resident or the stamp duty value of such property, whichever is higher if consideration or stamp duty value exceeds INR 50,00,000 Proposed to be effective from 1 April 2022. TDS on Payment of Rent u/s 194 IB : Excluded from Sec 206AB higher rate of deduction To reduce the tax burden on individuals and HUF, the provisions of section 206AB which provides for deduction of tax at a higher rates for non-filers of income tax is not applicable for Individuals and HUFs covered under 194-IB Proposed to be effective from 1 April 2022. February 2022 | 2

Tax to be deducted from benefit or perquisite New Section 194R New section 194R is proposed to be introduced to provide that the person responsible for providing to a resident, any benefit or perquisite before providing such benefit ensure that tax has been deducted at the rate of 10 percent. It applies to provision of benefits or a perquisite exceeding INR 20,000 to a resident during a financial year (in the course of business or profession) to be subjected to TDS. Where cash part is inadequate to cover TDS liability, the provider of the benefit or perquisite needs to ensure that the tax has been paid by the recipient of the benefit or perquisite. These provisions do not apply to an individual or a HUF, whose gross receipts or turnover does not exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such benefit or perquisite is provided. Propose to be effective from 1 July 2022. February 2022 | 3

TDS on transfer of Virtual Digital Assets - New Section 194S Payment of consideration to a resident on the transfer of virtual digital assets is proposed to be subject to TDS at 1% if consideration in aggregate during the FY exceeds INR 10,000. The annual threshold is extended to INR 50,000 if consideration is paid by an individual or an HUF, not having income from business or profession or those who are not subject to tax audit. Taxes if deducted under the proposed section 194S of the Act, then no TDS to deducted under any other section. Incase the payment for transfer is wholly in kind or partly in kind with insufficient cash to meet TDS liability, the person liable to deduct and remit TDS shall ensure that the tax has been paid before making the payment of consideration. The CBDT may issue further guidelines to understand how these provisions will be implemented given the virtual exchange environment Proposed to be effective from 1 July 2022. February 2022 | 4

Consequence for failure to deduct/collect or payment of tax u/s 201 (1A) and 206C(7) To avoid litigation in computation of interest sub-section (1A) of section 201 where the default for deduction/collection of tax or payment of tax continues, the provision is amended. It is now provided that where any order is made by the Assessing Officer for the default under sub- section (1) of the said section, the interest shall be paid by the person in accordance with the order made by the Assessing Officer in this regard. Similar changes are also proposed under sub-section (7) of section 206C Proposed to be effective from 1 April 2022. Higher rates in case of non-filers of return Section 206AB and 206CCA Provisions of sections 206AB and 206CCA provide for deduction or collection of tax at higher rates. The provisions apply to a specified person who has not filed the return of income for two assessment years relevant to the previous years immediately before the previous year in which tax is required to be deducted. It is now proposed to reduce two years requirement to one year under sections 206AB and 206CCA. Further, to reduce the additional burden on individuals and HUF, it is proposed that the provisions of section 206AB will not apply in relation to transactions on which tax is to be deducted under sections 194-IA, 194-IB, and 194M . Proposed to be effective from 1 April 2022 February 2022 | 5

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