The Union Budget 2022 has proposed various amendments in the existing TDS and TCS provisions, widened the scope of existing TDS provisions and introduced new TDS and TCS provisions vide Finance Bill, 2022. Further, interest, penalty and prosecution provisions related to TDS/TCS defaults are also amended. The changes in all the proposed provisions related to TDS and TCS are listed in this article.
Introduction
The Finance Bill, 2022 contains many provisions relating to amendments and changes in various TDS and TCS provisions and further introduced many new TDS and TCS provisions in the statute. Besides, certain provisions of the Income Tax Act, 1961 (‘Act’) have been amended which are related to compliance of the TDS provisions.
A snapshot of TDS and TCS provisions amended and introduced in the Finance Bill, 2021 are listed below-
The above TDS/TCS provisions as amended or introduced are detailed below.
Amendment in Section 194-IA to provide TDS on immovable property on stamp duty value
Section 194-IA of the Act provides for deduction of tax on payment on transfer of certain immovable property other than agricultural land.
Section 194-IA(1) provides for deduction of tax by any person responsible for paying to a resident any sum by way of consideration for transfer of any immovable property (other than agricultural land) at the time of credit or payment of such sum to the resident at the rate of 1% of such sum as income-tax thereon. Sub-section (2) provides that no deduction of tax shall be made where the consideration for the transfer of immovable property is less than fifty lakh rupees.
It is proposed to amend section 194-IA of the Act to provide that in case of transfer of an immovable property (other than agricultural land), TDS is to be deducted at the rate of one per cent. of such sum paid or credited to the resident or the stamp duty value of such property, whichever is higher. In case the consideration paid for the transfer of immovable property and the stamp duty value of such property are both less than fifty lakh rupees, then no tax is to be deducted under section 194-IA.
For this purpose, section 194-IA is proposed to be amended by Clause 56 of the Finance Bill, 2022.
Amendment of section 194-IA.
56. In section 194-IA of the Income-tax Act,–
(i) in sub-section (1), after the words “one per cent. of such sum”, the words “or the stamp duty value of such property, whichever is higher,” shall be inserted;
(ii) in sub-section (2), for the words “immovable property is”, the words “immovable property and the stamp duty value of such property, are both,” shall be inserted;
(iii) in the Explanation, after clause (b), the following clause shall be inserted, namely:–
‘(c) “stamp duty value” shall have the same meaning as assigned to it in clause (f) of the Explanation to clause (vii) of sub-section (2) of section 56.’.
Explaining the proposed amendments in Section 194-IA
Clause 56 seeks to amend section 194-IA of the Act relating to payment on transfer of certain immovable property other than agricultural land.
It is proposed to amend sub-section (1) of section 194-IA to provide that the person responsible for paying to a resident any sum by way of consideration for transfer of any immovable property (other than agricultural land) shall at the time of credit or payment of such sum to the resident deduct tax at the rate of one per cent of such sum or the stamp duty value of such property, whichever is higher, as income-tax thereon.
It is further proposed to amend sub-section (2) of the said section to provide that no deduction of tax shall be made where the consideration for the transfer of immovable property and the stamp duty value of such property, are both less than Rs. 50 Lakh.
It is also proposed to insert clause (c) to the Explanation to define “stamp duty value”. Stamp duty value shall have the meaning assigned to it in clause (f) of the Explanation to clause (vii) of sub-section (2) of section 56.
These amendments will take effect from 1st April, 2022.
Amendment in Section 194-IB to exclude the provisions of section 206AB
Section 194-IB of the Act provides for deduction of tax @ 5% on payment on rent by an individual or HUF to a resident landlord in excess of Rs. 50,000 per month.
Section 206AB which was inserted by the Finance Act, 2021 in Act provides for a higher rate of deduction in case of non-filers on income-tax return.
The provisions of section 206AB were extended to section 194-IB also. It means the individual or HUF is required to check whether the landlord was a filer or non-filer. It has increased the compliance burden on individuals and HUF. In order to reduce the additional burden on individual and Hindu undivided family (HUF) taxpayers covered under section 194-IB, the reference to section 206AB is omitted from section 194-IB.
As a result, individual and HUF taxpayers shall not be required to check whether their landlord is a filer or non-filer of income-tax return. They shall continue to deduct TDS @ 5% (or 20% if no PAN of landlord is available).
However, this amendment shall apply from 1.4.2022. Thus, they have to check for the applicability of section 206AB for FY 2021-22.
Clause 57 of the Finance Bill, 2022 amends section 194-IB in the following manner-
Amendment of section 194-IB.
57. In section 194-IB of the Income-tax Act, in sub-section (4), the words, figures and letters “or section 206AB” shall be omitted.
Explaining the proposed amendments in Section 194-IB
Clause 57 seeks to amend section 194-IB of the Income-tax Act relating to payment of rent by certain individuals or Hindu undivided family.
Sub-section (4) of the said section provides that where the tax is required to be deducted as per the provisions of section 206AA or section 206AB, 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.
It is proposed to amend the said sub-section (4) to omit the reference of section 206AB.
This amendment will take effect from 1st April, 2022.
Amendment in Section 201 / 206C(7): Computation of interest on default in TDS/TCS
Section 201 of the Act deals with the consequences of persons who-
a) fail to deduct tax or
b) after deducting, fail to deposit the same to the credit of the Central Government.
Sub-section (1A) of the said section provides that if any person who
a) is liable to deduct tax at source does not deduct it or
b) after so deducting fails to pay the same to the credit of the Central Government,
then he shall be liable to pay simple interest at the rates specified therein.
Similarly, sub-section (7) of section 206C of the Act provides that if any person who is liable to collect tax at source does not collect it or after so collecting fails to pay the same to the credit of the Central Government, then he shall be liable to pay interest at rates specified therein.
It is proposed to:
(i) amend sub-section (1A) of section 201 to provide that where any order is made by the Assessing Officer for the default under sub-section (1) of the said section, the interest shall be paid by the person in accordance with the order made by the Assessing Officer in this regard;
(ii) amend sub-section (7) of section 206C to provide that where any order is made by the Assessing Officer for the default under sub-section (6A) of the said section, the interest shall be paid by the person in accordance with the order made by the Assessing Officer in this regard.
Clauses 60 and 62 of the Finance Bill, 2022 amends section 201 and section 206C in the following manner-
Amendment of section 201.
60. In section 201 of the Income-tax Act, in sub-section (1A), after the proviso, the following proviso shall be inserted, namely:––
“Provided further that where an order is made by the Assessing Officer for the default under sub-section (1), the interest shall be paid by the person in accordance with such order.”.
Amendment of section 206C.
62. In section 206C of the Income-tax Act, in sub-section (7), after the proviso, the following proviso shall be inserted, namely:–– “Provided further that where an order is made by the Assessing Officer for the default under sub-section (6A), the interest shall be paid by the person in accordance with such order.”.
Explaining the proposed amendments in Section 201 and Section 206C
Clause 60 of the Bill seeks to amend section 201 of the Act relating to consequences of failure to deduct or pay.
Sub-section (1A) of the said section provides that if any person who is liable to deduct tax at source does not deduct it or after so deducting fails to pay the same to the credit of the Government, then, he shall be liable to pay simple interest at the rates specified therein.
It is proposed to insert a new proviso to Section 201(1A) to provide that where an order is made by the Assessing Officer for the default referred to in sub-section (1), the interest shall be paid by the person in accordance with such order.
This amendment will take effect from the 1st day of April, 2022.
Clause 62 of the Bill seeks to amend section 206C of the Act relating to profits and gains from the business of trading in alcoholic liquor, forest produce, scrap etc.
Sub-section (7) of the said section deals with the consequences of persons who fail to collect tax or after collecting, fail to deposit the same to the credit of the Central Government. If any person who is liable to collect tax at source does not collect it or after so collecting fails to pay the same to the credit of the Government, then he shall be liable to pay interest at rates specified therein.
It is proposed to insert a new proviso to the said sub-section to provide that where an order is made by the Assessing Officer for the default referred to in sub-section (6A), the interest shall be paid by the person in accordance with such order. These amendments will take effect from the 1st day of April, 2022.
Section 206AB and section 206CCA amended to exclude applicability of certain provisions and to widen and deepen tax-base
In order to widen and deepen the tax base and to nudge taxpayers to furnish their return of income, the Finance Act, 2021 inserted sections 206AB and 206CCA into the Act. The said sections provide for special provisions for deduction and collection of tax at source respectively, in case of specified persons at higher rates specified therein.
“Specified person” has been defined to mean a person who has not filed the returns of income for both the two assessment years relevant to the two previous years immediately preceding the financial year in which tax is required to be deducted or collected, for which the time limit for filing return of income under sub-section (1) of section 139 has expired; and the aggregate of tax deducted at source and tax collected at source in his case is Rs. 50,000 or more in each of these two previous years.
Government has provided online utility to taxpayers to check whether the person is a specified person or not.
Further, the provisions of section 206AB are not applicable in relation to transactions on which tax is to be deducted under sections 192, 192A, 194B, 194BB, 194LBC or 194N of the Act.
In order to ensure that all the persons in whose case significant amount of tax has been deducted do furnish their return of income, it is proposed to reduce two years requirement to one year by amending sections 206AB and 206CCA of the Act to provide that “specified person” to mean as a person who has not filed its return of income for the assessment year relevant to the previous year immediately preceding the financial year in which tax is to be deducted or collected, as the case may be, and the amount of tax collected and deducted at source is Rs. 50,000 or more in the said previous year.
Other relevant amendments related to section 206AB
However, in order to reduce the additional burden on individual and Hindu undivided family (HUF) taxpayers covered under section 194-IA, 194-IB and 194M of the Act for whom simplified tax deduction system has been provided without requirement of TAN, it is proposed that the provisions of section 206AB will not apply in relation to transactions on which tax is to be deducted under the said sections of the Act.
In addition to the above, it is also proposed to rectify a drafting error in sections 206AB and 206CCA wherein the terms “deductor” and “collectee” respectively were used incorrectly. Further, since the returns are now being furnished electronically, it is also proposed that in place of ‘filing’ of return, the term ‘furnishing’ of return may be substituted.
Further, as a consequential amendment in section 194-IB it is also proposed to omit the reference of section 206AB from sub-section (4) of the said section.
These amendments will take effect from 1 st April, 2022.
Clauses 61 and 63 of the Finance Bill, 2022 amend the provision of section 206AB and section 206CCA in the following manner:
Amendment of section 206AB.
61. In section 206AB of the Income-tax Act,–
(a) in sub-section (1),–
(i) for the figures, letters and word “194LBC or 194N”, the figures, letters and word “194-IA, 194-IB, 194LBC, 194M or 194N” shall be substituted;
(ii) the brackets and words “(hereafter referred to as deductee)” shall be omitted;
(b) in sub-section (3), for the portion beginning with the words “filed the returns of income” and ending with the words “each of these two previous years:”, the following shall be substituted, namely:–
“furnished the return of income for the assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be deducted, for which the time limit for furnishing the return of income under sub-section (1) of section 139 has expired and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in the said previous year:”.
Amendment of section 206CCA.
63. In section 206CCA of the Income-tax Act,–
(a) in sub-section (1), the brackets and words “(hereafter referred to as collectee)” shall be omitted;
(b) in sub-section (3), for the portion beginning with the words “filed the returns of income” and ending with the words “each of these two previous years:”, the following shall be substituted, namely:–
“furnished the return of income for the assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be collected, for which the time limit for furnishing the return of income under sub-section (1) of section 139 has expired and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in the said previous year:”.
Explaining the proposed amendments in Section 206AB and Section 206CCA
Clause 61 seeks to amend section 206AB of the Act relating to special provision for deduction of tax at source for non-filers of income-tax return.
Sub-section (1) of the said section provides the rates at which the tax shall be deducted in case of specified person.
It is proposed to amend the said sub-section (1) to,–
(i) include the reference of sections 194-IA, 194-IB and 194M in order to exclude its applicability; and
(ii) omit the brackets and words “(hereafter referred to as deductee) being superfluous”.
It is further proposed to amend sub-section (3) of the said section to provide that for the purposes of the said section, “specified person” shall mean a person who has not furnished the return of income for the assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be deducted, for which the time limit for furnishing the return of income under sub-section (1) of section 139 has expired and the aggregate of tax deducted at source and tax collected at source in his case is Rs. 50,000 or more in the said previous year.
These amendments will take effect from 1st April, 2022.
Clause 63 seeks to amend section 206CCA of the Act relating to special provision for collection of tax at source for non-filers of income-tax return. Sub-section (1) of the said section provides for the rates at which tax shall be collected in case of specified person.
It is proposed to amend the said sub-section (1) to omit the brackets and words “(hereafter referred to as collectee)”.
It is further proposed to amend sub-section (3) of the said section to provide that for the purposes of the said section, “specified person” shall mean a person who has not furnished the return of income for the assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be collected, for which the time limit for furnishing of return of income under sub-section (1) of section 139 has expired and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in the said previous year.
These amendments will take effect from 1st April, 2022.
With the proposed amendment of reducing the return filing period from two years to one year, the list of non-filers is expected to grow compared to the preceding year.
Insertion of New Section 194R: TDS on benefit or perquisite of a business or profession
Finance Bill, 2022 proposed to insert a new section 194R to provide for deduction of tax on benefit or perquisite in respect of business or profession.
As per clause (iv) of section 28 of the Act, the value of any benefit or perquisite, whether convertible into money or not, arising from business or exercise of profession is to be charged as business income in the hands of the recipient of such benefit or perquisite. However, in many cases, such recipient does not report the receipt of benefits in their return of income, leading to furnishing of incorrect particulars of income.
Accordingly, in order to widen and deepen the tax base, it is proposed to insert a new section 194R to the Act to provide that the person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from carrying out of a business or exercising of a profession by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of ten per cent of the value or aggregate of value of such benefit or perquisite. For the purpose of this section, the expression ‘person responsible for providing’ has been proposed to mean a person providing such benefit or perquisite or in case of a company, the company itself including the principal officer thereof.
Further, in a case where the benefit or perquisite, as the case may be, is wholly in kind or partly in cash and partly in kind but such part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such benefit or perquisite, the person responsible for providing such benefit of perquisite shall, before releasing the benefit or perquisite, ensure that tax has been paid in respect of the benefit or prerequisite.
No tax is to be deducted if the value or aggregate value of the benefit or perquisite paid or likely to be paid to a resident does not exceed twenty thousand rupees during the financial year.
Further, the provisions of the said section shall not apply to an individual or a Hindu undivided family, whose total sales, gross receipts or turnover does not exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such benefit or perquisite, as the case may be, is provided.
This amendment will take effect from 1st July, 2022.
For this purpose, Clause 58 of the Finance Bill, 2022 proposes to insert a new section 194R in the Act in the following manner-
Insertion of new section 194R.
58. After section 194Q of the Income-tax Act, the following section shall be inserted, namely:–
Deduction of tax on benefit of perquisite in respect of business or profession.
‘194R. Any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession, by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of ten per cent. of the value or aggregate of value of such benefit or prerequisite:
Provided that in a case where the benefit or perquisite, as the case may be, is wholly in kind or partly in cash and partly in kind but such part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such benefit or perquisite, the person responsible for providing such benefit or perquisite shall, before releasing the benefit or perquisite, ensure that tax has been paid in respect of the benefit or perquisite:
Provided further that the provisions of this section shall not apply in case of a resident where the value or aggregate of value of the benefit or perquisite provided or likely to be provided to such resident during the financial year does not exceed twenty thousand rupees:
Provided also that the provisions of this section shall not apply to a person being an individual or a Hindu undivided family, whose total sales, gross receipts or turnover does not exceed one crore rupees in case of business or fifty lakh rupees in case of profession, during the financial year immediately preceding the financial year in which such benefit or perquisite, as the case may be, is provided by such person.
Explanation.––For the purposes of this section, the expression “person responsible for providing” means the person providing such benefit or perquisite, or in case of a company, the company itself including the principal officer thereof.’.
Explaning the provisions of section 194R for TDS on benefit or perquisite of a business or profession
Clause 58 seeks to insert a new section 194R to the Income-tax Act, 1961 relating to deduction of tax on benefit or perquisite in respect of a business or profession.
The proposed new section provides that the person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of ten per cent. of the value or aggregate of value of such benefit or perquisite.
It is further proposed to provide that in a case where the benefit or perquisite, as the case may be, is wholly in kind or partly in cash and partly in kind but such part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such benefit or perquisite, the person responsible for providing such benefit of perquisite shall, before releasing the benefit or perquisite, ensure that tax has been paid in respect of the benefit or perquisite.
It is also proposed to provide that the provision of the said section shall not apply in case of a resident where the value or aggregate of value of the benefit or perquisite provided or likely to be provided to such resident during the financial year does not exceed twenty thousand rupees.
It is also proposed to provide that the provisions of the section shall not apply to a person being an individual or a Hindu undivided family, whose total sales, gross receipts or turnover does not exceed one crore rupees in case the of business or fifty lakh rupees in the case of profession, during the financial year immediately preceding the financial year in which such benefit or perquisite, as the case may be, is provided by such person.
It is also proposed to clarify that the expression “person responsible for providing” means the person providing such benefit or perquisite, or in case of a company, the company itself including the principal officer thereof.
This amendment will take effect from 1st July, 2022.
Insertion of new section 194S: TDS on transfer of virtual digital asset
Finance Bill, 2022 proposes to tax on virtual digital asset transactions and thus in order to capture the transactions details, section 194S is proposed to be inserted into the Act to provide for dedcution of tax on transfer of virtual digital asset (VDA).
In order to widen the tax base from the transactions so carried out in relation to these VDA assets, it is proposed to insert section 194S to the Act to provide for deduction of tax on payment for transfer of virtual digital asset to a resident at the rate of 1% of such sum. However, in case the payment for such transfer is–
(i) wholly in kind or in exchange of another virtual digital asset where there is no part in cash; or
(ii) partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such transfer, the person before making the payment shall ensure that the tax has been paid in respect of such consideration.
In case of specified persons, the provisions of section 203A and 206AB will not be applicable.
Further, no tax is to be deducted in case the payer is the specified person and the value or the aggregate of such value of consideration to a resident is less than Rs. 50,000 during the financial year. In any other case, the said limit is proposed to be Rs. 10,000 during the financial year.
It is also proposed to provide that if tax has been deducted under section 194S, then no tax is to be collected or deducted in respect of the said transaction under any other provision of Chapter XVII of the Act.
Furthermore, in any sum paid for transfer of virtual digital asset is credited to any account, whether called “Suspense Account” or by any other name, in the books of account of the person liable to pay such sum, such credit of the sum shall be deemed to be the credit of such sum to the account of the payee and the provisions of section 194S shall apply accordingly.
It is proposed to empower the Board to issue guidelines, with the prior approval of the Central Government, to remove any difficulty arising in giving effect to the provisions of the said section and every such guideline issued by the Board shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person responsible for paying the consideration on transfer of such virtual digital assets.
It is also proposed to provide that in case of a transaction where tax is deductible under section 194-O along with the proposed section 194S, then the tax shall be deducted under section 194S and not section 194-O.
For the purposes of the said section, it is proposed to provide that ‘specified person’ means a person:–
(i) being an individual or Hindu undivided family whose total sales, gross receipts or turnover from the business carried on by him or profession exercised by him does not exceed one crore rupees in case of business or fifty lakh rupees in case of profession, during the financial year immediately preceding the financial year in which such virtual digital asset is transferred;
(ii) being an individual or Hindu undivided family having income under any head other than the head ‘Profits and gains of business or profession’.
For this purpose, Clause 59 of the Finance Bill, 2022 proposes to insert a new section 194S to provide for TDS on transfer of virtual digital assets.
Insertion of new section 194S.
59. After section 194R of the Income-tax Act, the following section shall be inserted with effect from the 1st day of July, 2022, namely:––
Payment on transfer of virtual digital asset
‘194S. (1) Any person responsible for paying to a resident any sum by way of consideration for transfer of a virtual digital asset, shall, at the time of credit of such sum to the account of the resident or at the time of payment of such sum by any mode, whichever is earlier, deduct an amount equal to one per cent. of such sum as income-tax thereon:
Provided that in a case where the consideration for transfer of virtual digital asset is––
(a) wholly in kind or in exchange of another virtual digital asset, where there is no part in cash; or
(b) partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such transfer,
the person responsible for paying such consideration shall, before releasing the consideration, ensure that tax has been paid in respect of such consideration for the transfer of virtual digital asset.
(2) The provisions of sections 203A and 206AB shall not apply to a specified person.
(3) Notwithstanding anything contained in sub-section (1), no tax shall be deducted in a case, where––
(a) the consideration is payable by a specified person and the value or aggregate value of such consideration does not exceed fifty thousand rupees during the financial year; or
(b) the consideration is payable by any person other than a specified person and the value or aggregate value of such consideration does not exceed ten thousand rupees during the financial year.
(4) Notwithstanding anything contained in this Chapter, a transaction in respect of which tax has been deducted under sub-section (1) shall not be liable to deduction or collection of tax at source under any other provisions of this Chapter.
(5) Where any sum referred to in sub-section (1) is credited to any account, whether called “Suspense Account” or by any other name, in the books of account of the person liable to pay such sum, such credit of the sum shall be deemed to be the credit of such sum to the account of the payee and the provisions of this section shall apply accordingly.
(6) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the prior approval of the Central Government, issue guidelines for the purposes of removing the difficulty.
(7) Every guideline issued by the Board under sub-section (6) shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person responsible for paying the consideration on transfer of such virtual digital asset.
(8) Notwithstanding anything contained in section 194-O, in case of a transaction to which the provisions of the said section are also applicable along with the provisions of this section, then, tax shall be deducted under sub-section (1).
Explanation.–For the purposes of this section “specified person” means a person,–
(a) being an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business carried on by him or profession exercised by him does not exceed one crore rupees in case of business or fifty lakh rupees in case of profession, during the financial year immediately preceding the financial year in which such virtual digital asset is transferred;
(b) being an individual or a Hindu undivided family, not having any income under the head “Profits and gains of business or profession”.’.
Explaining the provisions of Section 194S for TDS on transfer of virtual digital asset
Clause 59 seeks to insert a new section 194S in the Act relating to payment on transfer of virtual digital asset.
The proposed sub-section (1) seeks to provide that any person responsible for paying to a resident any sum by way of consideration for the transfer of a virtual digital asset shall, at the time of credit of such sum to the account of the resident or at the time of payment of such sum by any mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon.
It is further proposed to provide a proviso therein that in a case where the consideration for transfer of the virtual digital asset is––
(a) wholly in kind or in exchange of another virtual digital asset, where there is no part in cash; or
(b) partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such transfer,
the person responsible for paying such consideration shall, before releasing the consideration, ensure that tax has been paid in respect of such consideration for the transfer of virtual digital asset.
The proposed sub-section (2) seeks to provide that provisions of sections 203A and 206AB shall not apply to a specified person.
The proposed sub-section (3) seeks to provide that notwithstanding anything contained in sub-section (1), no tax shall be deducted in a case, where––
(a) the consideration is payable by a specified person and the value or aggregate value of such consideration does not exceed fifty thousand rupees during the financial year; and
(b) the consideration is payable by any person other than a specified person and the value or aggregate value of such consideration does not exceed ten thousand rupees during the financial year.
The proposed sub-section (4) seeks to provide that notwithstanding anything contained in Chapter XVII of the Income-tax Act, a transaction in respect of which tax has been deducted under sub-section (1) shall not be liable to deduction or collection of tax at source under any other provision of the said Chapter.
The proposed sub-section (5) seeks to provide that where any sum referred to in sub-section (1) is credited to any account, whether called “Suspense Account” or by any other name, in the books of account of the person liable to pay such sum, such credit of the sum shall be deemed to be the credit of such sum to the account of the payee and the provisions of this section shall apply accordingly.
The proposed sub-section (6) seeks to provide that if any difficulty arises in giving effect to the provisions of this section, the Board may, with the prior approval of the Central Government, issue guidelines for the purpose of removing the difficulty.
The proposed sub-section (7) seeks to provide that every guideline issued by the Board under sub-section (6) shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person responsible for paying the consideration on transfer of such virtual digital asset.
The proposed sub-section (8) seeks to provide that notwithstanding anything contained in section 194-O, in case of a transaction to which the provisions of the said section are also applicable along with the provisions of this section then, tax shall be deducted under sub-section (1).
Explanation to the said section seeks to provide that for the purposes of the said section “specified person” means a person,––
(a) being an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business carried on by him or profession exercised by him does not exceed one crore rupees in case of business or fifty lakh rupees in case of profession, during the financial year immediately preceding the financial year in which such virtual digital asset is transferred;
(b) being an individual or a Hindu undivided family, not having any income under the head “Profits and gains of business or profession”.
This amendment will take effect from 1st July, 2022.
Amendment in Section 271C related to penalty for failure to pay TDS
Section 271C provides for penalty in case of failure to deduct tax and failure to pay the following tax-
i) Dividend Distribution Tax under section 115O and,
ii) the second proviso to section 194B.
Section 194B deals with the deduction of tax from winnings from lottery, etc.
Section 194B was amended vide Finance Act 1999 w.e.f. 01.04.2000 by which the first proviso to the section was omitted and the section currently has only one proviso. Therefore, to avoid ambiguity among the sections 271C and 194B, it is proposed to substitute the sub-clause (ii) of clause (b) of section 271C(1) with “proviso to section 194B”.
Clause 77 of the Finance Bill, 2022 amends section 271C as below-
Amendment of section 271C.
77. In section 271C of the Income-tax Act, in sub-section (1), in clause (b), in sub-clause (ii), the word “second” shall be omitted.
Explaining the provisions of Section 271C related to Penalty for failure to pay TDS u/s 194B
Clause 77 seeks to amend the section 271C of the Income-tax Act relating to penalty for failure to deduct tax at source. It provides for penalty for failure to credit tax deducted at source to the Central Government or the tax payable by him as required by or under the second proviso to section 194B.
The first proviso to section 194B was omitted by the Finance Act, 1999 with effect from the 1st day of April, 2000 and the said section currently has only one proviso.
To give consequential effect, it is proposed to omit the word “second” in sub-clause (ii) of clause (b) of sub-section (1) of the section.
This amendment will take effect from lst April, 2022.
Amendment in section 272A to increase the penalty amount
Section 272A of the Act provides for penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections etc. At present, the amount of penalty for failures listed under sub-section (2) of section 272A is one hundred rupees for every day during which the failure continues.
The penalty had not been increased since the section was introduced in 1999 and does not have an adequate deterrence value.
Therefore, it is proposed to increase the amount of penalty for failures listed under sub-section (2) of section 272A to Rs. 500 from the existing sum of Rs. 100 per day.
For this purpose, section 272A is amended by Clause 78 of the Finance Bill, 2022
Amendment of section 272A.
78. In section 272A of the Income-tax Act, in sub-section (2), in the long line, for the words “one hundred rupees”, the words “five hundred rupees” shall be substituted.
Explaining the provisions of Section 272A for increase in penalty amount
Clause 78 seeks to amend section 272A of the Act relating to penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections, etc.
It is proposed to increase the existing penalty under sub-section (2) from one hundred rupees to five hundred rupees.
This amendment will take effect from 1st April, 2022.
Amendment in Section 276B related to Prosecution for failure to pay TDS u/s 194B
Section 276B provides for prosecution for a term ranging from three months to seven years with fine for failure to pay tax to the credit of Central Government under Chapter XII-D or XVII-B. Under this section, a person shall be punishable for failure to -
a) deduct the tax as required under the provisions of Chapter XVII-B which deals with deduction of tax at source, or
b) to pay the tax, as required by or under–
(i) sub-section (2) of section 115-O or
(ii) the second proviso to section 194B.
Section 194B was amended vide Finance Act 1999 w.e.f. 01.04.2000 by which the first proviso to the section was omitted and the section currently has only one proviso.
Therefore, to avoid ambiguity among the sections 276B and 194B, it is proposed to substitute the sub-clause (ii) of clause (b) of section 276B with “proviso to section 194B”.
As discussed above, similar amendment is proposed in Section 271C for penalty.
Clause 80 of the Finance Bill, 2022 amends section 276B in the following manner-
Amendment of section 276B.
80. In section 276B of the Income-tax Act, in clause (b), in sub-clause (ii), the word “second” shall be omitted.
Explaining the provisions of Section 276B related to Prosecution for failure to pay TDS u/s 194B
Clause 80 seeks to amend section 276B of the Act relating to failure to pay tax to the credit of Central Government under Chapter XII-D or XVII-B.
The first proviso to Section 194B was omitted vide the Finance Act, 1999 with effect from the 1st April, 2000 and the section currently has only one proviso. It is proposed to omit the word “second” in the said section 276B.
This amendment will take effect from 1st April, 2022.
Amendment in section 278A and section 278AA to include prosecution u/s 276BB for failure to pay TCS
Sections 278A and 278AA are related to punishment with prosecution against persons for failure to pay tax to the credit of Central Government under Chapter XVII-B for tax deducted at source.
However, similar provisions for offence with respect to tax collected at source under Chapter XVII-BB, providing for punishment with prosecution against persons failing to pay tax collected at source is not there under sections 278A and 278AA.
Therefore, it is proposed to include section 276BB under sections 278A and 278AA owing to the similar nature of offences that are punishable under section 276B and section 276BB.
Clause 82 and Clause 83 of the Finance Bill, 2022 amends the section 278A and section 278AA in the following words-
Amendment of section 278A.
82. In section 278A of the Income-tax Act, after the word, figures and letter “section 276B”, the words, figures and letters “or section 276BB” shall be inserted.
Amendment of section 278AA.
83. In section 278AA of the Income-tax Act, after the words, figures and letter “or section 276B”, the words, figures and letters “or section 276BB” shall be inserted.
Explaining the amended provisions of section 278A and section 278AA
Clause 82 seeks to amend the section 278A of the Act relating to punishment for second and subsequent offences. Section 276B provides for prosecution for failure to credit tax deducted at source to the Central Government and section 276BB provides for prosecution for failure to credit tax collected at source to the Central Government.
It is proposed to amend the said section 278A so as to bring section 276BB within the purview of said section.
This amendment will take effect from 1st April, 2022.
Clause 83 seeks to amend section 278AA of the Act relating to punishment not to be imposed the certain cases.
Section 276B provides for prosecution for failure to credit tax deducted at source to the Central Government and section 276BB provides for prosecution for failure to credit tax collected at source to the Central Government.
It is proposed to amend the said section 278AA so as to bring section 276BB also within the purview of said section.
This amendment will take effect from 1st April, 2022.
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Download Finance Bill, 2022 (PDF) as introduced in Loksabha
Download Memorandum Explaining the Provisions in the Financial Bill 2022
Income Tax announcements in Budget Speech: Union Budget 2022
New Income Tax Slab Rates after Union Budget 2022
Changes in Personal Taxation by Union Budget 2022
Section 139(8A): Filing of Updated Return - Budget 2022
Corporate Tax Proposals: Union Budget 2022
Changes in TDS and TCS Provisions by Finance Bill, 2022
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