​Clarification regarding short deduction of TDS/TCS due to increase in rates of surcharge by Finance (No. 2) Act, 2019

Circular No. 8/2020

F. No. 370133/S/2020-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(TPL Division)

Room No. 147B-II, North Block, New Delhi
Dated 131h April, 2020

Subject: Clarification regarding short deduction ofTDSITCS due to increase in rates of surcharge by Finance (No.2) Act, 20l9-reg.

The Finance (No.2) Bill,20 19 was tablcd in Lok Sabha on 51h July, 2019 which was passed by both the houses of Parliament and became Finance (No.2) Act, 2019 (the Act) which received assent of the President on l SI August, 2019. The Act provided for increase in the rate of surcharge as under:

S.noIncome slabSurcharge before the Act Enhanced surcharge as providcd by thc Act
1Less than 50 lakh rupeesNil Nil
250 lakh rupees but less than I crorc rupees10%10%
3I crore rupees but less than 2 crore rupees15%15%
42 crore rupees but less than 5 crorc rupees15%25%
55 crore rupees and above15%37%
  1. The enhanced rates of surcharge were applicable from the I SI day of April, 2019 for previous year 2019-20 relevant to assessment year 2020-21. Thus, every person as referred to above was required to compute his tax liability after taking into account the enhanced rates of surcharge. Furthcr, TDS/TCS under various provisions of the Income-tax Act is rcquired to be deducted! collected after taking into account the enhanced rate of surcharge.

3. Several cases have come to the notice of thc Central Government wherein dcductorsl collectors wcre held to be an asscssee in default for short deduction of TDS/s hort collection of TCS in cascs where final transaction was done before laying of the Financc (No.2) Bill, 2019 in the Parliament, i.e. 51h July, 2019 Since the transaction was complctcd before the rates of enhanced surcharge werc announced and the concerncd deductee/payee is required to furnish their Income-tax return for tbe relevant assessment
year, it has bccn requested that in such cases, deduct or or collector should not be held to be an assessee in default under section 20 I of the Income-tax Act.

4. The above issue has been examined by the Board and in this regard, it is clarified a person responsible for deduction/collection of tax under any provision of the Income-tax Act will not be considered to be an assessee in default in respect of transactions where:-

a) such transaction has been completed and entire payment has been made to the deductee/payee on or before 5th July, 2019 and there is no subsequent transaction between the deductor/collector and the deductee/payee in the financial year 2019-20 from which the shortfall of tax could have been
deducted/collected by the deductor/collector;

b) TDS has been deducted or TCS has been collected by such deductor/collector on such sum as per the rates in force as per the provisions prior to the enactment of the Act;

c) such tax deducted or collected has been depositcd in the account of Central Government by the deductor/collector on or before tbe due date of depositing the same;

d) TDSITCS statement has been furnished by such person on before the due date of filing oftbe said statement.

  1. However, if the person fails to fulfill any of the conditions as laid down above, such a person will, witb respect to short deduction/collection, not be eligible for benefit provided under this circular.

6. Further, if the deductor/collcctor has dcductcd/collected shortfall of tax after 51h of July, 2019 from the transaction(s) made subsequently aftcr the said date, interest, if any, for delay in deduction/collection of such tax shall not be levied.

7. The above relaxation does not absolve the deductee/payee to pay proper tax including enhanced surcharge by advance tax or self-assessmcnt tax and file return of income after paying such tax.

8. This issues with the approval of Finance Minister.

Dy. Commissioner of Income-tax (OSD)
TPL Division

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