CBDT vide Notification No. 54/2020 dated 24.07.2020 has amended Rule 31AA, Rule 37BC, Rule 37CA, Rule 37-I of the Income Tax Rules, 1962 and Form No. 27EQ to incorporate the changes introduced in the TCS provisions by the Finance Act, 2020.
Amendment in Rule 31AA
Rule 31AA is related to furnishing of ‘Statement of TCS’ under section 206C(3) of the Income Tax Act, 1961. According to section 206C(3), every collector is required to furnish a statement of tax collection and deposit of TCS in the prescribed form and within the prescribed time limit after paying the tax collected to the credit of the Central Government.
Rule 31AA(1)/(2) prescribes filing of quarterly TCS statements u/s 206C(3) in Form No. 27EQ.
Following amendments have been made in Rule 31AA
1. Two new clauses are inserted in Rule 31AA(4) to provide for particulars under sections 206C(1G) and 206C(1H) in view of the amendments related to TCS provisions being made in the Act by the Finance Act. 2020-
“(vi) furnish particulars of amount received or debited on which tax was not collected,-
(a) by the authorised dealer from the buyer under the first proviso to sub-section (1G) of section 206C;
(b) by the authorised dealer under fourth proviso to sub-section (1G) of section 206C; and
(c) by the authorised dealer or seller of an overseas tour program from the buyer under clause (i) or clause (ii) of the fifth proviso of sub-section (1G) of section 206C or in view of any notification issued under clause (ii) of the fifth proviso of sub-section (1G) of section 206C.
Sub-Section (1G) to section 206C has two clauses and five provisos. One clause is related to remittance of amount out of India under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India RBI) and the other clause is related to payments made for overseas tour programme package. This is made effective from 01.10.2020.
The salient features of amendment under section 206C(1G) by the Finance Act, 2020 are given below-
1. An authorised dealer receiving an amount or an aggregate of amounts of Rs. 7 Lakh or more in a financial year for remittance out of India under the LRS of RBI shall be liable to collect TCS on the amount in excess of Rs. 7 Lakh from a person remitting such amount out of India.
2. The rate of TCS is 5 per cent in the above case. In non-PAN/non-Aadhaar cases, the rate of TCS shall be 10 per cent.
3. An authorised dealer receiving an amount or an aggregate of amounts of Rs. 7 Lakh or more in a financial year for remittance out of India under the LRS of RBI and if the remittance is a loan obtained from any financial institution as defined in section 80E, for the purpose of pursuing any education shall be liable to collect TCS on the amount in excess of Rs. 7 Lakh from a person remitting such amount out of India.
4. The rate of TCS is 0.5 per cent in the above case. In non-PAN/non-Aadhaar cases, the rate of TCS shall be 5 per cent.
5. A seller of an overseas tour program package who receives any amount from any buyer, being a person who purchases such package, shall be liable to collect TCS. In this case, no threshold limit is provided.
6. Either the authorised dealer or seller to collect TCS based on the medium of remittance in the above case.
7. The rate of TCS is 5 per cent in the above case. In non-PAN/non-Aadhaar cases, the rate of TCS shall be 10 per cent.
8. The above TCS provision shall not apply if the buyer is,-
(a) liable to deduct tax at source under any other provision of the Act and he has deducted such amount.
(b) the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in Explanation to clause (20) of section 10 or any other person notified by the Central Government in the Official Gazette for this purpose subject to such conditions as specified in that notification.
(vii) furnish particulars of amount received or debited on which tax was not collected from the buyer,-
(a) under second proviso to sub-section (1H) of section 206C; and
(b) under sub-clause (A) or sub-clause (B) or sub-clause (C), or in view of any notification issued under sub-clause (C), of clause (a) of the Explanation to sub-section (1H) of section 206C.”
Section 206(1H) deals with TCS on sale of any goods in certain cases.
The salient features of amendment under section 206C(1H) by the Finance Act, 2020 are given below-
1. It is also proposed to amend section 206C to levy TCS on sale of goods.
2. Only those seller whose total sales, gross receipts or turnover from the business carried on by it exceed Rs. 10 crore during the financial year immediately preceding the financial year, shall be liable to collect such TCS.
3. Similarly, TCS shall be collected from a buyer from whom consideration of more than Rs. 50 lakh will be received in the previous year.
4. The provision only covers business entities and not professionals.
5. No TCS is to be collected from the Central Government, a State Government and an embassy, a High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in Explanation to clause (20) of section 10 or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to conditions as prescribed in such notification.
6. No TCS is applicable in case of export or import of goods.
7. Similarly, Central Government may notify persons, subject to conditions contained in such notification, who shall not be liable to collect such TCS.
8. No such TCS is to be collected, if the seller is liable to collect TCS under other provision of section 206C or the buyer is liable to deduct TDS under any provision of the Act and has deducted such amount.
9. In the case of the sale of goods, the rate of TCS is 0.1 per cent. In non-PAN/non-Aadhaar cases the rate shall be 1 per cent.
Amendments in Rule 37BC
Rule 37BC provides for relaxation from deduction of tax at higher rate under section 206AA.
As per section 206AA, if the payee/deductee fails to furnish his valid PAN to the deductor, then the rate of TDS shall be 20 per cent instead of the prescribed rate of TDS in the Income tax Act, 1961 or in the Finance Act for the relevant previous year, if the prescribed rate of TDS is lower than 20 per cent except for section 194-O. Where tax is required to be deducted under section 194-O (TDS by e-commerce operator) and the payee (e-commerce participants) fails to provide valid PAN to the deductor then the prescribed higher rate of TDS is 5 per cent and not 20 per cent.
Section 206AA(7)(ii) provides that the provisions of section 206AA shall not apply to certain payments if the prescribed conditions are satisfied. This relaxation is provided only for non-residents and foreign companies.
In this regard, Rule 37BC in the Income Tax Rules, 1962 is enshrined to provide for the nature of incomes on which section 206AA shall not apply and also the conditions which need to be fulfilled for such relaxation.
Presently, Rule 37BC covers the following payments where section 206AA does not apply subject to fulfillment of conditions specified therein-
(i) interest,
(ii) royalty,
(iii) fees for technical services and
(iv) payments on transfer of any capital asset
Rule 37BC is now being amended to include ‘dividend’ in the list of payments to which section 206AA shall not apply if the payment is made to a non-resident or a foreign company subject to fulfillment of conditions specified in Rule 37BC.
Readers may recall that from 01.04.2020, the exemption on dividend income was withdrawn subsequent to abolishment of Dividend Distribution Tax under section 115-O. The dividend income shall now be taxable in the hands of the recipient.
Read more: New Section 80M-Deduction for Inter Corporate Dividend
Clause 3 of the Notification No. 54/2020 dated 24.07.2020 provides as follows-
3. In the principal rules, from the date of publication in the Official Gazette, in rule 37BC, in sub-rule (1), after the words “fees for technical services”, the words “, dividend” shall be inserted.
Amendments in Rule 37CA
Rule 37CA deals with time and mode of payment of tax collected at source(TCS) to the Government under section 206C.
Presently, this rule covers TCS under sub-section (1) and (1C) to section 206C. Since new subsections have now been covered under section 206C, therefore, the reference to these sub-sections have been removed from Rule 37CA and the amended Rule 37CA now covers TCS under section 206C.
Clause 4 of the Notification No. 54/2020 dated 24.07.2020 provides as follows-
4. In the principal rules, in rule 37CA, the words, brackets, figures and letters ‘sub-section (1) or sub-section (1C)’, wherever they occur, shall be omitted.
Amendments in Rule 37-I
Rule 37-I deals with Credit for tax collected at source (TCS) for the purposes of section 206C(4). Section 206C(4) provides that any amount collected as TCS and paid to the credit of the Central Government shall be deemed to be a payment of tax on behalf of the person from whom the amount has been collected and credit shall be given to such person for the amount so collected in a particular assessment year in accordance with the rules as may be prescribed by the Board from time to time.
Presently,Rule 37-I(2) provides that credit of TCS shall be allowed in the year in which the income is offered to tax. This rule is amended to insert a new sub-rule 2A to provide that credit of TCS u/s 206C(1F)/(1G) and (1H) shall be allowed in the year in which tax collection is made.
Clause 5 of the Notification No. 54/2020 dated 24.07.2020 provides as follows-
5. In the principal rules, in rule 37-I, after sub-rule (2), the following sub-rule shall be inserted namely:-
“(2A) Notwithstanding anything contained in sub-rule (2), for the purposes of sub- section (1F) or, sub-section (1G) or, sub-section (1H) of section 206C, credit for tax collected at source shall be given to the person from whose account tax is collected and paid to the Central Government account for the assessment year relevant to the previous year in which such tax collection is made”
Amendments in Form 27EQ
Existing Form 27EQ is replaced with a new Form 27EQ to provide for details incorporating the above amendments.
Download Copy of Notification No. 54/2020 dated 24.07.2020 on Amendments in TCS Statements Rule 31AA, Form 27EQ and others in pdf format.
1 Comments
Could you please explain : 8. The above TCS provision shall not apply if the buyer is,-
ReplyDelete(a) liable to deduct tax at source under any other provision of the Act and he has deducted such amount.