CBDT Notifies Amendment in Rule 31A, Form 26Q and 27Q for section 194N and others: CBDT vide Notification No. 43/2020 dated 03.07.2020 has amended Rule 31A of the Income Tax Rules, 1962 and Form No. 26Q and Form No. 27Q to incorporate the changes introduced by the Finance Act, 2020.
Rule 31A is related to furnishing of ‘Statement of TDS’ under section 200(3) of the Income Tax Act, 1961. According to section 200(3), every deductor is required to furnish a statement of tax deduction and deposit of TDS in the prescribed form and within the prescribed time limit after paying the tax deducted to the credit of the Central Government.
Rule 31A(2) prescribes filing of quarterly TDS statements u/s 200(3) in the following forms-
Following amendments have been made in Rule 31A
1. Rule 31(4)(viii) is amended to include tax deducted at lower rate under section 197A(1F).
Rule 31(4) provides for the particulars to be furnished in the statements of tax deducted. Presently clause (viii) requires furnishing of particulars of amount paid or credited on which tax was not deducted in view of the notification issued under sub-section (1F) of section 197A. Section 197A(1F) is amended by the Finance Act, 2020 to provide for deduction of tax at a lower rate.
Hence, this amended provision of deduction of tax at a lower rate is incorporated in Rule 31A(4)(viii).
2. Finance (No. 2) Act, 2019 introduced section 194N to provide for TDS on large cash withdrawal from banks and post office accounts. Finance Act, 2020 substituted section 194N to provide for additional provisions for TDS on cash withdrawals for non-filers of income tax return. As a result, various clauses and provisos have changed in the new substituted section.
To align with the new section, clause (ix) of the Rule 31(4) is also substituted with the following for furnishing of particulars for TDS on cash withdrawals under section 194N-
“furnish particulars of amount paid or credited on which tax was not deducted or deducted at lower rate in view of the notification issued under second proviso to section 194N or in view of the exemption provided in third proviso to section 194N or in view of the notification issued under fourth proviso to section 194N.”
3. Four new clauses are inserted in Rule 31(4) to provide for particulars under the mentioned sections in view of the amendments being made in the Act by the Finance Act. 2020-
(x) furnish particulars of amount paid or credited on which tax was not deducted or deducted at lower rate in view of the notification issued under sub-section (5) of section 194A.
(xi) furnish particulars of amount paid or credited on which tax was not deducted under sub-section (2A) of section 194LBA.
(xii) furnish particulars of amount paid or credited on which tax was not deducted in view of clause (a) or clause (b) of sub-section (1D) of section 197A.
(xiii) furnish particulars of amount paid or credited on which tax was not deducted in view of the exemption provided to persons referred to in Board Circular No. 3 of 2002 dated 28th June 2002 or Board Circular No. 11 of 2002 dated 22nd November 2002 or Board Circular No. 18 of 2017 dated 29th May 2017.
Section 194A(5) is inserted by Finance Act, 2020 to provide that the Central Government may, by notification in the Official Gazette, provide that the deduction of tax shall not be made or shall be made at such lower rate, from such payment to such person or class of persons, as may be specified in the said notification.
Section 194LBA(2A) has been inserted vide Finance Act, 2020, to provide that no tax shall be deducted by a business trust from dividend distributed to the unit holders provided the SPV has not exercised the option under section 115BAA.
Section 197A(1D)(a) and (b) deals with non deduction of TDS by Offshore Banking Unit from the interest payment to a non-resident or a person not ordinarily resident in India. This information is captured through Form 27Q for pre-filling of return of income.
Circular No. 3/2002 was issued for grant of exemption from the requirement of deduction of income-tax at source under sections 193, 194A and 194K of the Income-tax Act on the payment of incomes to Ramakrishna Math and Ramakrishna Mission whose income is exempt under sub-clause (iv) of section 10(23C) of the Income-tax Act, 1961. Circular No. 11/2002 extended the scope of Circular No. 3/2002 to provide that interest on all securities covered under section 193 may be paid to Ramakrishna Math and Ramakrishna Mission without tax deduction at source.
Similarly, Circular No. 18/2017 was issued to grant payment to certain exempt institutions without deduction of income tax. These institutions or funds are Funds set up by LICI, IRDA, CERC, Prasar Bharti, Prime Minister National Relief Fund, Provident Fund, ESI Fund, etc.
Amendments in Form 26Q
1. New sections 194K, 194-O, 197A is inserted in Form 26Q so that above-mentioned particulars can be furnished.
2. Section 194J is splitted into two parts to incorporate the amendments in section 194J by the Finance Act, 2020 of two different rates of 2% and 5%.
3. New validation Codes or flags are provided for reporting of reasons for non-deduction or lower deduction of tax-
1. Write "A" if "lower deduction" or "no deduction" is on account of a certificate under section 197.
2. Write "B" if no deduction is on account of declaration under section 197A other than the cases mentioned in sub-section (1F) of section 197A.
3. Write "C" if deduction is on higher rate on account of non-furnishing of PAN by the deductee/payee.
4. Write “D” if no deduction or lower deduction is on account of payment made to a person or class of person on accont of notification issued under sub-section (5) of section 194A.
5. Write “E” if no deduction is on account of payment being made to a person referred to in Board Circular no. 3 of 2002 dated 28 th June, 2002 or Board Circular no. 11 of 2002 dated 22nd November, 2002 or Board Circular no. 18 of 2017 dated 28th May, 2017.
6. Write "Y" if no deduction is on account of payment below threshold limit specified in the Income-tax Act, 1961.
7. Write "T" if no deduction is on account of deductee/payee being transporter. PAN of deductee/payee is mandatory [section 194C (6)].
8. Write "Z" if no deduction or lower deduction is on account of payment being notified under section 197A (1F).
9. Write “M” if no deduction or lower deduction is on account of notification issued under second proviso to section 194N.*
10. Write “N” if no deduction or lower deduction is on account of payment made to a person referred to in the third proviso to section 194N or on account of notification issued under the fourth proviso to section 194N.*
11. Write “O” if no deduction is as per the provisions of sub-section (2A) of section 194LBA.
Amendments in Form 27Q
1. New sections 194N, 197A is inserted in Form 27Q so that above mentioned particulars can be furnished.
2. New validation Codes or flags are provided for reporting of reasons for non-deduction or lower deduction of tax-
1. Write “A” if “lower deduction” or “no deduction” is on account of a certificate under section 197.
2. Write “C” if grossing up has been done.
3. Write “D” if deduction is on higher rate on account of non-furnishing of [Permanent Account Number or Aadhaar Number] by the deductee.
4. Write “O” if no deduction is in view of sub-section (2A) of section 194LBA.
5. Write “M” if no deduction or lower deduction is on account of notification issued under second provison to section 194N.*
6. Write “N” if no deduction or lower deduction is on account of payment made to a person referred to in the third proviso to section 194N or on account of notification issued under the fourth proviso to section 194N.*
7. Write “G” if no deduction is in view of clause (a) or clause (b) of sub-section (1D) of section 197A
Download Copy of Notification No. 43/2020 dated 03.07.2020 on Amendments in Rule 31A, Form 26Q and 27Q in pdf format.
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