The Central Board of Direct Tax (CBDT) on Monday issued the Clarification regarding short deduction of Tax Deduction at Source (TDS)/ Tax Collected at Source (TCS) due to increase in rates of surcharge by Finance Act, 2019.
The Finance (No.2) Act, 2019 provided for an increase in the rate of the surcharge and was made applicable from Assessment Year 2020-21 where no surcharge was leviable up to an income of Rs. Fifty lakh.
In this regard, several cases have come to the notice of the Central Government wherein deductors or collectors were held to be an assessee in default for short deduction of TDS/short collection of TCS in cases where the final transaction was done before laying of the Finance (No.2) Bill, 2019 in the Parliament, i.e. 5 July 2019. Since the transaction was completed before the rates of enhanced surcharge were announced and the concerned deductee/payee is required to furnish their Income-tax return for the relevant assessment year, it has been requested that in such cases, deductor or collector should not be held to be an assessee in default under section 201 of the Income Tax Act, 1961.
The board keeping in mind such situation clarified “such transaction has been completed and entire payment has been made to the deductee/ payee on or before 5 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; 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; such tax deducted or collected has been deposited in the account of Central Government by the deductor/ collector on or before the due date of depositing the same; TDS/ TCS statement has been furnished by such person on before the due date of filing of the said statement.”
The circular further clarified that if any person who fails to comply with the provisions, such a person will with respect to short deduction/collection, not be eligible for the benefit provided under this circular.
“If the deductor/ collector has deducted/ collected shortfall of tax after 5 of July, 2019 from the transaction(s) made subsequently after the said date, interest, if any, for the delay in deduction/collection of such tax shall not be levied. The above relaxation does not absolve the deductee/payee to pay proper tax including enhanced surcharge by advance tax or self-assessment tax and file return of income after paying such tax,” the circular said.
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