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TDS on payment of rent by individuals or HUF (w.e.f. 01.06.2017)

Under the existing provisions of section 194-I, any Individual or HUF making payment of rent beyond the threshold limit and who are required to get their accounts audited under section 44AB are liable to deduct tax at source at the rates specified, either at the time of credit or payment, whichever is earlier.
In order to widen the scope of tax deduction at source, section 194-IB is proposed to be inserted to provide that any individual or HUF (other than those required to get their accounts audited under section 44AB), making payment of rent exceeding Rs. 50,000 per month or part of the month shall deduct tax on such payments @ 5%.
Such tax is to be deducted either at the time of credit or payment, whichever is earlier, once in a previous year, i.e., either from rent for the last month of the previous year or from the last month of tenancy.
In order to reduce the compliance burden, it is further proposed that the deductor is not required to obtain TAN as per section 203A of the Act.
Where tax is to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.

TDS in case of payments under specified agreements (w.e.f. 01.04.2017)

It is proposed to insert new section 194-IC in the Act to provide that in case any monetary consideration is payable under a specified agreement referred to in sub-section (5A) of section 45, i.e., a registered agreement in which a person owning land or building or both agrees to allow another person to develop a real estate project on such land or building or both, then the monetary consideration other than the consideration in kind, viz. share in land or building or both, shall be subject to TDS @ 10%.

TDS in case of fees for professional or technical services under section 194J (w.e.f. 01.06.2017)

As per the existing provisions of section 194J, payment exceeding Rs.30,000 to a resident by way of fees for professional or technical services is subject to TDS @10%.
F It is proposed to insert fourth proviso in section 194J to provide that in case of payee engaged only in the business of operation of call center, tax shall be deducted @ 2% instead of 10%.

Non-deduction of tax in case of exempt compensation under RFCTLAAR Act, 2013 (w.e.f. 01.04.2017)

Under the existing provision of section 194LA, any person paying compensation on account of compulsory acquisition of any immovable property (other than agricultural land ) is required to deduct tax @10% on such compensation.
The Central Government has enacted a new law, namely, Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, ('RFCTLARR Act') on 26th September, 2013 w.e.f. 1st January, 2014. Section 96 of the RFCTLARR Act provides that income-tax shall not be levied on compensation received for compulsory acquisition of land under the RFCTLARR Act (except those made under section 46 of RFTCLARR Act).
It is proposed to insert proviso to section 194LA to provide that no tax shall be deducted in case of payment made in respect of any award or agreement which has been exempted from levy of income-tax under section 96 (except those made under section 46) of RFCTLARR Act.

TDS on income by way of interest on loan, certain bonds and Government securities (w.e.f. 01.04.2018)

As per section 194LC any Indian company or Business Trust responsible to pay any income, before the 1st day of July, 2017, to a non-resident by way of interest, on monies borrowed either under a loan agreement or by issue of long term bond including long-term infrastructure bond, is required to deduct tax thereon at the concessional rate of 5%.
As per section 194LD any person responsible for paying any income, before the 1st day of July, 2017, to Foreign Institutional Investor or Qualified Foreign Investor by way of interest on a Government security or rupee denominated bond of an Indian company is required to deduct tax thereon at the concessional rate of 5%.
In order to continue to provide the benefit of concessional rate of tax, it is proposed to extend the time limit from 1st day of July, 2017 to 1st day of July, 2020.
The benefit of concessional rate of tax withholding under section 194LC of the Act is also proposed to be extended to monies borrowed by an Indian company in rupee denominated bonds (popularly known as ‘Masala Bonds’) before the 1st day of July, 2020. This provision is retrospectively effective from 01.04.2016.

Benefit of Form 15G/15H for commission payments specified under section 194D (w.e.f. 01.06.2017)

In terms of the proposed amendment, benefit of non-deduction of tax by providing declaration in Form 15G/15H to the effect that there would be nil tax on total income after including such income, has now been extended to income in the nature of insurance commission.

Meaning of persons as mentioned in sub-section (1F) of section 206C (w.e.f. 01.04.2017)

In terms of the proposed amendment, new clause (iii) is to be inserted in Explanation to section 206C to provide that ‘buyer’ in terms of sub- section (1F) (relating to sale of motor vehicles having value exceeding Rs.10 Lakhs) does not include the following persons:

- Central Government, State Government, Embassy, High Commission, legation, commission, consulate and the trade representations of a foreign State;
- Local authority as defined in Explanation to clause (20) of section 10; or
- Public sector company which is engaged in the business of carrying passengers.

Requirement of furnishing PAN by the collectee in the case of TCS (w.e.f. 01.04.2017)

Under the existing provisions of the Act, there is no provision which mandates necessary quoting of PAN by the persons making payment of any amount on which provisions of section 206C of the Act apply.
As a consequence, the collectee who does not furnish PAN or furnishes incorrect PAN still remains outside the ambit of tax authorities.
In order to prevent leakage of tax, it is proposed to insert section 206CC to provide for necessary furnishing of valid PAN by collectee failing which the tax shall be collected at the higher of the following rates:

twice the rate specified in the relevant provision; or
5%

4. If the declaration becomes invalid at a later stage, then, TCS shall be collected at the rates specified in section 206CC.

5. PAN of the collectee is to be mandatorily quoted by the buyer and the seller in all correspondences, bills, vouchers and other documents sent to each other.

6. In case valid PAN is not provided to the collector, no TCS certificate shall be issued to the collectee.

No TCS on purchase of jewellery

Under the existing provisions of section 206C of the Act, tax is required to be collected at source by the seller @ 1% from the buyer of jewellery, if sale consideration exceeds Rs.5 lakhs.
In view of proposed insertion of section 269ST and 271DA prohibiting cash transaction exceeding Rs.3 lakhs, it is proposed amend section 206C to omit the requirement of collecting TCS on sale of jewellery.

Vaish Associates Advocates

(Corporate, Tax and Business Advisory Law Firm)