Income Tax TDS / TCS amendments vide Finance Act, 2021

Income Tax TDS / TCS amendments vide Finance Act, 2021

The Finance Bill, 2021 was introduced in Lok Sabha on 01st February 2021. It was passed by Lok Sabha on 23rd March 2021. Overall, 127 amendments were made in bill as compared to Draft.

Finance Bill 2021 received the Assent of President on 28th March 2021 and become FINANCE ACT, 2021.

In this new Finance Act various amendments have been made especially in TDS/TCS which are mentioned below.

  • Amendment in Section 194 – Exemption from TDS on payment of Dividend to business trust-

As per current provision TDS @ 10 % is required to deduct if amount exceeds Rs. 5000 if payee is an individual. But no threshold limit was mentioned in case of non-individual. Hence an amendment is brought in Section 194 that no TDS is required to be deducted on payment of dividend to business trust by special purpose vehicle referred to in Explanation to clause (23FC) of Section 10 or any other person notified.

  • Amendment in Section 194A- No TDS on payment of interest by an infrastructure debt fund-

No TDS should be deducted on Income relation to Zero coupon bond issued by Infrastructure Debt Fund (IDF).

  • Amendment in Section 194-IB – Higher rate of TDS for non-filers of ITR

Under Section 194IB it is mandatory to deduct TDS when rent payment exceeds Rs 50000 for month or part of the month.

This section is applicable on an individual or a Hindu undivided family

Amendment is brought in this section that in case tax is required to be deducted as per provision of Section 206AA (Non-furnishing of PAN) or Sec 206AB (Higher rate of TDS for non-filers) then max deduction allowed shall not exceed rent payable for last month of previous year or last month of tenancy.

  • Section 194P – Deduction of tax in case of specified senior citizen

To provide benefit to senior citizens (age 75 years or above) the Government has inserted this new section.

Conditions: -

-       Senior Citizen resident in India having age 75 years or above during previous year.

-       His only source of income should be pension.

-       He shall furnish specific details to specific bank about deduction under Chapter VI-A and rebate U/s 87A.

  • Amendment in Section 206AA: Higher rate of TDS for deduction u/s 196Q in case of non-PAN deductee-

In case where tax is deducted u/s 194Q and PAN is not provided, then TDS shall be at @ 5%.

  • New Section 206AB: Higher rate for deduction of tax at source (TDS) for non-filers of income-tax return

a. Section 206AB of the Act would apply on any sum or income or amount paid, or payable or credited, by a person (herein referred to as deductee) to a specified person.

b. The specified person is a person who has not filed the returns of income for both of the two assessment years relevant to the two previous years which are immediately before the previous year in which tax is required to be deducted or collected, as the case may be.

c. TDS rate in this section is higher of the followings rates:-

(i) Twice the rate specified in the relevant provision of the Act; or

(ii) Twice the rate or rates in force; or

(iii) The rate of five per cent

d. If the provision of section 206AA of the Act is applicable to a specified person, in addition to the provision of this section, the tax shall be deducted at higher of the two rates provided in this section and in section 206AA of the Act.

e. Aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in each of these two previous years.
f. Specified person shall not include a non-resident who does not have a permanent establishment in India.

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