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CBDT Order Extension of Validity of Lower or Nil TDS Certificates till June 30 Corona Outbreaks

Sujit Talukder Tuesday, March 31, 2020
cbdt-order-extension-of-validity-of-lower-or-nil-tds-certificates-till-june-30-corona-outbreaks

In another step of providing relief to the taxpayers and alienate their hardships in the lockdown situation due to pandemic COVID-19 outbreak, the Central Board of Direct Taxes (CBDT) has extended the validity date of lower TDS/TCS certificates that is ending on 31.03.2020,  for a period of three months to June 30,2020.

 In a release dated 31.03.2020, the CBDT said that in view of the hardships faced by taxpayers due to the COVID-19 pandemic, CBDT issues notification easing the process of issue of certificates for lower rate/nil deduction/collection of TDS or TCS w.r.t. FY 2020-21.

In this respect, it is pertinent to note that every person who expects that the deduction of income tax on his payments at the prescribed rate of TDS will be more than his income tax liability then he can apply to the Income Tax Department to issue a lower or Nil TDS certificate u/s 197 of the Income Tax Act, 1961. The Assessing Officer then issues a certificate u/s 197 which authorizes the deductor to deduct TDS at a rate lower than the prescribed rate of TDS from the payments that the deductor will pay to the deductee.

The lower TDS certificate issued u/s 197 carries the Name of the deductor, TAN of the deductor and nature of the transaction. The certificate so issued u/s 197 remains valid for one year and its validity ends on 31st March of the previous year. The certificate u/s 197 also limit the maximum amount up to which the certificate is valid. In other words, the lower rate of TDS shall remain valid only up to the amount mentioned in the certificate.

Normally, the application for the issue of lower TDS certificate u/s 197 is filed in the month of Feb-March of the preceding previous year. Thus, the application for issue of certificate u/s 197 for FY 2020-21 must have been filed by the assessees in Feb-March 2020. The filing of the application and the issue of certificates is online-based through TRACES portal.

There may be situations where the assessing officers did not get the time to dispose of the applications by 31st March due to country-wide lockdown for COVID-19.

In this context, the order of CBDT states that where the application is pending disposal as on date for FY 2020-21 but a similar certificate was issued in FY 2019-20, then the certificate for FY 2019-20 shall remain valid till 30.06.2020. The certificate shall remain valid as it is basis except for the ending date of validity. The deductor and the nature of the transaction and the amount for which the certificate is issued shall continue to remain valid till 30.06.2020.

However, if the amount is exhausted by March 2020 then the extension has no meaning has pending disposal of a fresh certificate for FY 2020-21, the tax will be deducted at the full rate. 

Suppose, a lower TDS certificate u/s 197 is issued for FY 2019-20 to A Ltd authorizing it to deduct TDS @ 3% on interest payments made to B Ltd for a maximum amount of Rs. 10 Lakh. The certificate is valid till 31.03.2020.

Now in view of the CBDT's order dated 31.03.2020, the validity of the lower TDS certificate gets extended up to 30.06.2020. If A Ltd. already exhausted Rs. 10 Lakh by March 2020, then the extension has no benefit to A Ltd/B Ltd and it should deduct TDS at the full rate of 10 per cent. On the other hand, if A Ltd. has exhausted Rs. 9 Lakh till March 2020 then it can deduct TDS at 3 per cent up to Rs. 1 Lakh till 30.06.2020 or a new TDS certificate is issued for FY 2020-21.

It must be remembered that there is no increase in the limit of the maximum amount (quantum limit) to which the lower rate will apply either proportionately or otherwise.

The order further states that the situation will remain the same if no application could be filed by the assessee by March 2020 but have a certificate issued for FY 2019-20. In this case, the assessee should apply by 30.06.2020 for the issue of lower TDS certificate and cover the transactions also in the application.

New procedure to file an application for issue of lower TDS certificate u/s 197 by e-mail

The order has also addressed the case of a first-time applicant for certificate u/s 197. In this case, no application is filed till  March 2020 (An application can be filed even after the commencement of the financial year) and also has no certificate issued for the preceding financial year 2019-20.

In this case, an application with the requisite details and documents shall be filed to the assessing officer by an email. The AO shall issue the certificate by e-mail to the applicant who in turn shall distribute the certificate to the deductors. 

It appears that this a temporary arrangement made by the income tax department for the benefit of the taxpayers and expected that this procedure shall remain valid till 30.06.2020 or till the normalcy returns. However, it is not clear how the assessing officer will be able to issue the certificates if he cannot come to his office.


The new procedure is prescribed in the annexure to the Order dated 31.03.2020.
SUMMARY OF THE ORDER DATED 31.03.2020 PRESENTED IN TABULAR FORMAT

Sl.
Cases
Deductee/ Payee
Deductor/ Payer
(a)
Where the deductee or payee has filed an application for certificate of lower / nil TOS / TCS on the TRACES portal for FY. 2020-21 and whose applications are pending for disposal as on date and they have been issued such certificates for FY 2019-20
Deductee or Payee should Communicate to deductor or payer that he has applied for lower/nil TDS/TCS certificate on the TRACES portal for FY 2020-21 and as per this CBDT’s order should deduct  TDS or collect TCS for FY 2020-21 as per lower TDS/TCS certificate for FY 2019-20 till 30-Jun-20 or date of disposal of present application, whichever is earlier

As soon as the current application is disposed off and a new lower/nil TDS/TCS certificate for FY 2020-21 is issued by the AO, deductee or Payee should again communicate to the deductor or payer that going forward, TDS/TCS for FY 20-21 would apply as per the new certificate for FY 2020-21
On receipt of communication from the deductee or payee payee, then deductor or payer should deduct / collect TDS/TCS for FY 2020-21 as per lower/nil TDS/TCS certificate of FY 2019-20 till 30-Jun-20 related to rate, nature of transaction and quantum limit till further communication from TRACES/AO or deductee/ payee for new lower/nil TDS/TCS certificate for FY 2020-21.

If no new certificate is received then from 1st Jul, start deducting or collecting TDS/TCS as per normal rates.
(b)
Where the deductee or payee has not filed an application for certificate of lower/nil TDS/TCS on the TRACES portal for FY 2020-21 but have been issued such certificates for FY 2019-20
Deductee or Payee should Communicate to deductor or payer that he will apply for lower/nil TDS/TCS certificate for FY 2020-21 and as per this CBDT’s order should deduct  TDS or collect TCS for FY 2020-21 as per lower TDS/TCS certificate for FY 2019-20 till 30-Jun-20 or date of disposal of present application, whichever is earlier.

Apply at the earliest for lower/nil TDS/TCS certificate for FY 2020-21 by email giving details and as per the procedure mentioned in the Annexure of this Order.

As soon as the current application is disposed off and a new lower/nil TDS/TCS certificate for FY 2020-21 is issued by the AO, deductee or Payee should again communicate to the deductor or payer that going forward, TDS/TCS for FY 20-21 would apply as per the new certificate for FY 2020-21
On receipt of communication from the deductee or payee payee, then deductor or payer should deduct / collect TDS/TCS for FY 2020-21 as per lower/nil TDS/TCS certificate of FY 2019-20 till 30-Jun-20 related to rate, nature of transaction and quantum limit till further communication from deductee/ payee for new lower/nil TDS/TCS certificate for FY 2020-21.

If no new certificate is received then from 1st Jul, start deducting or collecting TDS/TCS as per normal rates.
(c)
Where the deductee or payee has not filed an application for certificate of lower/nil TDS/TCS on the TRACES portal for FY 2020-21 and no such certificate issued for F.Y.2019-20
Apply at the earliest for lower/nil TDS/TCS certificate for FY 2020-21 by email giving details and as per the procedure mentioned in the Annexure of this Order.

As soon as the application is disposed off and a new lower/nil TDS/TCS certificate for FY 2020-21 is issued by the AO, deductee or Payee should communicate to the deductor or payer that going forward, TDS/TCS for FY 20-21 would apply as per the new certificate for FY 2020-21
Only on receipt of lower/nil TDS/TCS certificate for FY 2020-21, deductor or payer should start deducting or collecting TDS or TCS as per the rates etc., as specified in the certificate.






Read the full text of the CBDT Order dated 31-03-2020 extending the validity of the lower or nil TDS/TCS certificates 


F. No. 275/25/2020-IT(B)

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

North Block. New Delhi
31st March, 2020

Subject: Order u/s 119 of The Income Tax Act, 1961 on issue of certificates for lower rate/nil deduction/collection of TDS or TCS u/s 195, 197 and 206C (9) - reg-

Due to outbreak of the pandemic Covid·19 virus, there is severe disruption in the normal working of almost all sectors including functioning of the Income Tax Department. In such a scenario. the applications filed by the payees u/s 195 and 197 of the Act for lower or nil rate of deduction of TDS and applications by but u/s 206C (9) of the Act for lower or nil rate of collection of TCS for F.Y. 2020-21, have not been attended in a timely manner by the TDS/TCS-Assessing Officers. causing hardship to taxpayers.

2. Considering the constraints of the Field Officers in disposing of the applications for lower or nil rate of TDS/TCS and to mitigate hardships of payees and buyers/licensees/lessees, the CBDT issues following directions/clarifications by exercise of its powers u/s 119 of the Act: 

a) All the assessees who have filed application for lower or nil deduction of TDS/TCS on the Traces Portal for F.Y.2020-21 and whose applications are pending for disposal as on date and they have been issued such certificates for FY 2019-20, then such certificates would be applicable till 30.06.2020 of F.Y. 2020-21 or disposal of their applications by the Assessing Officers, whichever is earlier, in respect of the transaction and the deductor or collector if any for whom the certificate was issued for F.Y. 2019-20. 

b) In cases where the assessees could not apply for issue of lower or nil deduction of TDS/TCS on the Traces Portal for the FY 2020-21. but were having the certificates for F.Y. 2019-20, such certificate will be applicable till 30.06.2020 of F.Y. 2020-21. However, they need to apply at the earliest giving details of the transactions and the Deductor/Collector to the TDS/TCS Assessing Officer as per procedure laid down in sub-para c) below, as soon as normalcy is restored or 30.06.2020, whichever is earlier. 

c) In cases where the assessee has not applied for issue of lower or nil deduction of TDS/TCS in the Traces Portal, and he is also not having any such certificate for F.Y.2019-20, a modified procedure for application and consequent handling by the TDS/TCS Assessing Officer is laid down which is enclosed as Annexure.

d) On payments to Non-residents (including foreign companies) having Permanent Establishment in India and not covered by (a) and (b) above, tax on payments made will be deducted at the rate of 10% including surcharge and cess, on such payments till 30.06.2020 of F.Y. 2020-21, or disposal of their applications, whichever is earlier. 
( Mahesh Kumar)
Director (IT-Budget), CBDT
Annexure

 Application for Lower/Nil deduction Certificate: The applicant shall apply for the Lower/Nil deduction/collection certificate under sections 197/206C(9) of the Income Tax Act vide an e-mail addressed in the Assessing Officer concerned The email shall contain data/documents as under-

1. Duly filled in Form 13 (Annexure-I and/or Annexure-III)
2. The documents/information as required to be uploaded on TDS-CPC website while filling up of Fonn 13
3. Projected Balance Sheet and P&L account of FY 2020-21
4. Provisional Balance Sheet and P&L account of FY 2019-21
5. Balance Sheet and P&L account of FY 2018-19
6. Form 26AS for FY 2019-20 & 2018-19
7. ITR pertaining to FY 2018-19

For issue of certificates for lower/ nil deduction of tax under sections 195(2) and 195(3), the process of furnishing of applications will continue to be same with the modification that the applications will be filed via email and certificates will also be issued via email.

Issuance of the certificate: The certificate(s) shall be issued up to 30.06.2020 or any other date (earlier than 30.06.2020) as specified by the AO. The Assessing Officer shall communicate the issuance of certificate vide mail containing the following information:
Sl No
TAN of the deductor
PAN of the deductee
Financial Year
Section under which Tax at source is to be deducted or collected
Estimated amount of income/sum to be received/paid
Applicable rate of deduction/collection
Valid from Date
Valid to Date











The issuance of certificate shall be communicated to the applicant who in turn shall share the same with the deductor/collector. 

 Download copy of CBDT Order dated 31-03-2020 extending the validity of the lower or nil TDS/TCS certificates 

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