1. Section 191 – Amendment – Direct Payment of Tax.

Section 191 casts a responsibility on every assessee to pay tax on his own on every income which is not subject to deduction at source.

Sub-section(2) is sought to be inserted to provide for payment of tax, directly by an assessee, in whose hands income on account of Employees’ Stock Option arises. Generally such income is taxed in the year of allotment or transfer. It is proposed that tax on income arising on account of ESOP of an elligible start up company, shall be payble directly by the employee within fourteen days of certain events like expiry of fortyeight months from the end of relevant assessment year, date of sale of the security or the employee ceasing to be the employee of company alloting the security.

2. Section 192 – Amendment – Tax at Source on income under the head Salaries

Section 192 has been amended and its scope has been extended by insertion of sub-section (1C) to deduct tax at source on income arising from allotment / sale of security elligible security or cessation of employment, as specified in sub-section (2) of section 191. The employer shall now have to include such income in estimating the income under the head salaries. The tax is to be deducted or paid within fourteen days of accrual of income under conditions specified.

The amendment creates a new time frame for payment of tax and confusion is likely to arise on the date of payment of tax. It would be better if the date of payment be kept the same as date of payment of tax deducted from salaries.

3. Section 194 – Amendment – Tax at source on Dividend

This section provides for deduction of tax at source from dividends paid to a resident, within India. Tax is not to be deducted at source on dividend on which Dividend Distribution Tax is paid in terms of section 115O.

The scope of deduction of tax at source is sought to be extended to payments made by any mode other than cash or cheque or warrant. The rate of tax deduction is sought to be raised to ten per cent instead of the rates in force. The threshold limit for deduction is being raised from two thousand five hundred rupees to five thousand rupees. It is also proposed to consequentially omit the third proviso to the said section i.e. Dividend Distribution Tax.

4. Section 194A – Amendment – Interest other than Interest on Securities

Section 194A mandates deduction of tax at source on payment of interest other than interest on securities by an assessee other than Individual and HUF to a person resident in India. Individuals and HUF who are subject to tax audit in immediately preceeding financial year are also required to deduct tax at source at rates in force.

It is proposed that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him 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 interest is credited or paid, shall be liable to deduct income-tax under the said section.

It is also proposed to amend sub-section (3) so as to insert a proviso to provide that a co-operative society referred to in clause (v) or clause (viia) shall be liable to deduct income-tax in accordance with the provisions of sub-section (1), if–– (a) the total sales, gross receipts or turnover of the co-operative society exceeds fifty crore rupees during the financial year immediately preceding the financial year in which the interest referred to in sub-section (1) is credited or paid; and the threshold limit for deduction shall be fifty thousand rupees for senior citizens and forty thousand rupees in case of others.

5. Section 194C – Amendment – Payment to Contractors

Section 194C requires deduction of tax at source by a contractor for carrying out any work at one or two per cent depending upon the status of the payee.

It is proposed that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him 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 interest is credited or paid, shall be liable to deduct income-tax under the said section.

6. Section 194H & 194I – Amendment – Commission or Brokerage & Rent

The requirement for deduction of tax at source under these sections has been on payers other than individuals and HUF. The scope of deduction also extended to Individuals and HUF who have been subject to tax audit.

It is proposed that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him 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 interest is credited or paid, shall be liable to deduct income-tax under the said section.

7. Sction 194J – Amendment – Fee for Professional or Technical Services

Section 194J requires any person other than an Individual and HUF and specified Individuals and HUF who are subject to tax audit to deduct tax at source on payments in nature of Professional or Technical Services at a rate of ten per cent.

There have been instances of difference in view whether the payment should be covered u/s 194C or 194J. This has led to lot of litigation. In order to reduce the litigation it is proposed that in the case of fee for technical services, not being professional service, the rate of tax deduction at source shall be two per cent and in case of Professional services it shall be ten per cent.

It is also proposed that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him 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 interest is credited or paid, shall be liable to deduct income-tax under the said section.

8. Section 194K – Insertion – Income in respect of Units

A new section 194K is sought to be inserted to deduct tax at source from any income in respect of units of Mutual Fund specified u/s 10(23D), income distributed by Administrator of the specified undertaking or specified company. The rate of deduction at source is ten per cent. Threshold limit of five thousand rupees has been prescribed.

Insertion of section 194K, apparently seems to have been inserted after restricting the scope of section 115R to payments made up to 31st March, 2020.

Tax u/s 194K is to be deducted on ‘any income’. The term any income has not been defined or clarified. It may be subject to different interpretation whether it is restricted to income of nature similar to dividend or may also include income in nature of capital gain also at the time of redemption of the units.

9. Section 194LBA – Amendment – Income from units of a Business Trust

At present Business trust are required to deduct tax on distribution of income, referred to in section 115UA, being of the nature referred to in sub-clause (a) of clause (23FC) or clause (23FCA) of section 10, at the rate of ten per cent to a resident and at the rate of five per cent to a non-resident (not being a company) or a foreign company, respectively.

It is proposed to amend the said section so as to omit the reference of sub-clause (a) of clause (23FC) of section 10 from the said section. Thus, liability to deduct tax shall be applicable on distribution of income referred to in section 115UA, being of the nature referred to in clause (23FC) or clause (23FCA) of section 10, to a resident and to a non-resident (not being a company) or a foreign company.

It is further proposed to amend sub-section (2) of the said section to provide that the tax is to be deducted at the rate of five per cent in case of income the nature referred to in sub-clause (a) of clause (23FC) of section 10 and at the rate of ten per cent in case of income of the nature referred to in sub-clause (b) of the said clause.

10. Section 194-O – Insertion – Payment of certain sums by e-commerce operator to e-commerce participant

E-commerce business has been increasing over a period of time in view of advancement in technology. To widen and deepen the tax net by bringing participants of e-commerce within tax net, it is proposed to insert a new section 194-O in the Act so as to provide for a new levy of TDS at the rate of one per cent of the gross amount of sale or services or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier. Any payment made by a purchaser of goods or recipient of service directly to an e-commerce participant for sale of goods or provision of services or both, facilitated by an e-commerce operator, shall be deemed to be amount credited or paid by the e-commerce operator to the ecommerce participant and shall be included in the gross amount of such sales or services for the purpose of deduction of income-tax under the said sub-section.

Where e-commerce participants are Individuals or HUF, no deduction of tax at source shall be made if the sum credited or paid or likely to be credited or paid during the previous year to the account of an e-commerce participant, where the gross amount of such sales or services or both during the previous year does not exceed five lakh rupees and the ecommerce participant has furnished his Permanent Account Number or Aadhaar number to the e-commerce operator.

Sub-section (3) of the said section provides that notwithstanding anything contained in Part B of this Chapter a transaction in respect of which tax has been deducted by the e-commerce operator under sub-section (1), or is not liable to deduction under sub-section (2), shall not be liable to tax deduction at source under any other provision of Part B of this Chapter. Part B of the Chapter refers to provisions for Deduction of Tax at Source.

It is further proposed to exclude the application of the said sub-section to any amount or aggregate of amounts received or receivable by an ecommerce operator for hosting advertisements or providing any other services which are not in connection with the sale of goods or services referred to in sub-section (1).

Definitions of the expressions “electronic commerce”, “e-commerce operator”, “e-commerce participant” and “service” have been stated. This amendment will take effect from 1st April, 2020.

11. Section 206C – Amendment – Collection of Tax at Source

Sub-section (1G) and (1H) are proposed to be inserted in section 206C.

(1G) relates to collection of tax at source on:

Remittances out of India of amount of rupees seven lakh rupees or more made through Authorised Dealer in a financial year under the Liberalised Remittance Scheme of Reserve Bank of India,

In respect of an overseas tour programme by a seller of overseas tour programme package.

The collection is to be made at a rate of five per cent of the amount debited / collected.

(1H) relates to collection of tax at source, by the seller, if he receives consideration for sale of any goods of the value or aggregate value exceeding fifty lakh rupees in any previous year.

The collection is to be made at a rate of 0.1 per cent of the sale consideration exceeding fifty lakh rupees.

If the buyer does not provide his PAN / Aadhaar number collection of tax at source has to be at one per cent.