The Finance Minister Ms. Nirmala Sitharaman presented the Union Budget for the year 2022-2023 on 1st February, 2022. It is attempted to make this article interesting by a fiction of assumed doctor’s prescription for the two patients, namely, Mr. TDS and Mr. TCS (who are twin brothers).

A. Assumed Doctor’s prescription for the patient’s name namely Mr.TDS & Mr.TCS (Twin Brothers)

Case sheet:

  1. NAME OF THE DOCTOR:  Nirmala Sitharaman, Finance Minister, New Delhi

  2. PATIENTS’ NAMES:  TDS & Mr. TCS (Twin Brothers) alias Assessee in default/ Assessee in default (Names … deliberately WITHHELD as it involves deduction at source).

  3. APPOINTMENT DATE AND TIME: Patients met the doctor on the appointed date, namely 01.02.2022 at 11:00 AM via television.

B. HISTORY OF THE PATIENTS: The Budget for the year 2022-23 continues the vision drawn in the Budget of 2021-22 with a few changes in the Finance Bill covering issues of not only taxation but inter alia introduced a scheme for taxation of virtual digital assets.

C. FOCUS: This article focusses on the various provisions of Finance Bill, 2022 relating to provisions on TDS and TCS which seek to amend the Income Tax Act,
1961. The legislative intent is manifest as the Government is attempting to widen the tax base and revenue mobilization. This Government aims to make in India concept, ease of doing business and trying to introduce faceless assessments at all levels. This Government also has made the general public use digital wallets such as BHIM, GPay, Paytm, etc which has gained the confidence of common man. At the same time, the public is generously making use of e-commerce transactions which delivers goods at the doorsteps without anyone knowing the origin of the goods, from an unknown packer, unknown agent delivers goods at your door steps seeking your appreciation of good ratings etc. At the same time, the liability to deduct tax at source is not felt in respect of each of the transactions. Once the number is put in its place, the volume which goes scot free from the TDS obligations is mindboggling. Sudden entry by start-up companies into the stock market also makes one wonder the volume of each transaction which may or may not involve virtual assets, also raises an eyebrow as to why and how the transactions are to be traced, identified and locate the incidents of taxation at every point of time either through the mechanism of tax deduction at source or tax collection at source, as the case may be. These two tax collectors (TDS and TCS) act as agents for the Government and the monies collected goes to the coffers directly of the Government. But what is shocking is that the penal and prosecution provisions are not fastened on any particular so called violator of the respective obligations suggested in the budget proposals by the Finance Minister in this budget. An attempt is made to illustrate some of the provisions in the chart below, which is only illustrative, which are as under:

Sl. No.

Proposed Amendment



Amendment of Section 194-IA

Effective from 1st April, 2022

It is proposed to amend Section 194-IA of the Act to deduct TDS at the rate of one per cent of such sum paid or credited as consideration or the stamp duty value of such property, whichever is higher. However, no tax is to be deducted if the consideration paid and the stamp duty value of such property are both less than fifty lakh rupees. This will not apply to agricultural land.


Amendment of Sections 206AB and 206CCA

Effective from 1st April, 2022

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. In section 194- IA, 194-IB, and 194-M of the Act, Section 206AB will not apply in relation to transactions on which tax is to be deducted under these Sections. However, the onus is on the payer.


Insertion of Section 194R

Effective from 1st July, 2022

In order to ensure that benefits or perquisites get reported, Section 194R is proposed to be inserted requiring the person responsible for providing a resident any benefit or perquisite to deduct tax 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. Rs.20,000/- is the threshold per year. This provision will not apply to individuals or HUF, whose gross turnover is less than one crore, for professionals less than fifty lakhs during preceding financial year.


Insertion of Section 115BBH

Effective from 1st April, 2023

To provide that where the total income of an assessee includes any income from transfer of any virtual digital asset, the income- tax payable shall be the aggregate of the amount of income-tax calculated on income of transfer of any virtual digital asset at the rate of 30%. No deduction in respect of any expenditure other than cost of acquisition or allowance or set off of loss shall be allowed. No set off/carry forward of any loss arising from transfer of virtual digital asset shall be allowed. With effect from AY 2023-24 and subsequent years of assessment.


Insertion of Section 194S

Effective from 1st July, 2022

In order to widen the tax base from transactions of virtual digital asset, deduction of tax on payment for transfer of virtual digital asset to a resident at the rate of one percent of such sum.

In this context, attention is invited to the other relevant provisions such as Sections 43CA and 50C of the Act; Clause (f) of the Explanation to clause (vii) of sub-section (2) of section 56; Sections 192, 192A, 194B, 194BB, 194LBC or 194N of the Act; Section 194-IA, 194-IB and 194M of the Act; Section 194S of the Act; Explanation to clause (x) of sub-section (2) of section 56 of the Act; Clause (47A) proposed to be inserted to section 2 of the Act defines Virtual Digital Asset and also Non fungible token or any other token of similar nature or any other digital assets as may be notified by the Central Government are also roped in. Gift of virtual digital asset is also hit through explanation to Section 56(2)(x). If one goes through this basket containing these provisions narrated, it will be clear that the Government is making an attempt to translate its legislative intent by some mechanism, working of it has to be tested over a period of time to see if these provisions do not hurt the sentiment of market, public at large, regulators and the common man. In taxing statutes, the social conditions are sometime not given due weightage. The intricate language used in taxing jurisprudence is always a matter of debates and any person hurt by a narrow interpretation will be struck down as unconstitutional if it violates the provisions of the Article 265 of the Constitution of India.

D. Fresh Challenges on Mr. TDS and Mr. TCS: With the proposal to bring in the above amendments through the Finance Bill, 2022 to the Income Tax Act, there comes a few challenges of its own. The ambit of Tax Deducted at Source has certainly been widened by the Government with several changes proposed in the Bill. However, with these changes, especially pertaining to virtual digital assets, there appears a few problems or questions left unanswered by the Government. The Government has classified crypto currency under the asset class and not a legal tender. By not imposing a complete ban on its trading, the Government has proposed to levy tax on gains made through trade of virtual digital asset and also proposed deduction of tax on payment for transfer of crypto currency. In case of transfer of crypto currency, or a virtual digital asset for that matter, a TDS of 1% is levied. The trading of crypto currency occurs on crypto exchanges, where the seller may not be known to the purchaser. In such a scenario, the Deductor who is required to deduct tax would not be able to fulfil the requirement of issuing a TDS certificate by the TDS Deductor to the deductee, the failure of which attracts penalty, which is now proposed to be increased under Section 272A(2) from one hundred rupees to five hundred rupees. The Budget seems to complicate the issue by introducing the TDS obligations of unknown trader, unknown buyer and unknown seller. There could be cases where cash transaction may be generated directly or indirectly through the unknown agent handling crypto currency which may or may not be tracked or traced through cloud accounting or ERPs and the players are left in the lurch which might give some sort of extra hand to the tax authorities to locate certain transferors and transferees who are/were involved in the transaction either remotely or through some circuitous route either under a design or unintendedly involving themselves, through datamining or artificial intelligence. A classic example is where suddenly you will find in income tax portal where they mention some transactions which are/ were never done by you but SMS are sent by the Tax authorities causing a panic and results in total discomfort in locating the veracity of those data. Also the portal maintained by tax authorities do not match with PAN numbers, Aadhaar numbers, which remain uncorrected for reasons best known to stakeholders. Overall, the current Budget 2022 is a no-frill budget that focuses primarily on widening the tax base. A rather simple comparison in the crypto currency scenario is to the scenario of the stock exchange. Owing to the clear regulations and the presence of a regulator (namely the Securities Exchange Board of India), there exist clearcut obligations on all relevant stakeholders including buyers, sellers, exchanges while buying or selling quoted stocks. The additional challenge posed by such inclusion of TDS provisions in relation to digital assets is therefore a shot in the dark that may potentially cause more harm than intended given that there is no regulation existing as on date to identify corresponding obligations of stakeholders.

E. PATIENTS’ COMPLAINTS: The recent provisions are highly draconian and not user friendly to the patients’, both Resident and Non-resident persons who are similarly placed along with that of the patients, and the disease they are going through are one and the same. This disease is aggravated due to the announcement made in the Budget 2022-23 on 01.02.2022, which forced the patients to approach the doctor after the first appointment through this article written in this journal.

F. CLINICAL ANALYSIS: To widen and deepen the tax base a few changes have been proposed for deduction and collection of tax at source, considering the representations made already and to be made after hearing all the stakeholders including the patients who are before the doctor. However, the remedy does not match the evil effected by the disease.

G. FIRST AID: Provision for public investment for economic recovery and Government trying to give enough cash savings to meet the unexpected inflation caused by COVID-19 Omicron and the prevalent pandemic all over India and is also a global phenomenon which seems to go unending and comes in waves as the day grows and does not die like the sunset on each day. Considering the statistics produced by Governmental agencies, the spike in virus, suffering by the public on health grounds and in some cases resulting in deaths causes chaotic day to day living and the man on the road suffers the most due to lack of medical facilities bearing in mind the totality of the population of our country. The first aid given here is only temporary. The patients TDS and TCS are spared only to certain extent and with regard to other matters continued in the past are not in any way made comfortable for running the economy.

H. DATA RELATED THE BIRTH OF NEW PROVISIONS: The doctor FM notices the reasons to make a new TDS and TCS provisions as per the clauses 56 to 63, in order to strengthen the DNA of the intention of the parliament to give effect to ease of doing business and the salutary principles envisaged in the finance bill as a preamble to the introduction of new amendments.

I. COMPLICATIONS: Headache, migraine, harassment, Virtual Digital Asset Taxation – a new variant is found in the absence of adjustability to suit the convenience of the existing set up of our business carried on in our country, the role played by e-commerce and the e-portals of tax department causing several glitches noticed by public at large which debate is going on for past nine months and the Government came heavily on the out-source entity to regularise the same in order to make it user friendly and without any glitches, hurdles on the technical front.

J. PENALTY AND PROSECUTION: The patient is suffering under the Damocles’ sword of penalty and prosecution provisions already contained in Tax statutes and aggravated by the content of the Finance Bill 2022 and the highhandedness of handling such dictatorial attitude to force TDS and TCS and the like persons to go through the rigour of strict implementation of laws which violates the right to life and liberty of the said individuals like Mr. TDS and Mr. TCS. The principles laid down by the Constitutional Bench of the Hon’ble Supreme Court of India in Justice Puttuswamy vs. Union of India, (2017) 10 SCC 1 which ensures right to privacy as part of the fundamental rights of every citizen of this country. This principle is pressed into service, every law, be it general law or fiscal law, should fulfil the test of right to privacy read with right to life and right to peaceful living as per the fundamental rights chapter and directive principles of state policy. In fact, the Madurai Bench of the Madras High Court has also observed that right to laughter and humour should also be made part of the fundamental rights, in the lighter vein. Based on this background, where the Parliament brings legislation to increase in penalty for default in issuance of TDS certificate after the prescribed timelines by the deductor, results in more injustice and causes chaotic situations in the ongoing pandemic times. Failure to deduct or collect tax as the case maybe or failure to pay the same to the credit of the Central Government, interest at a specified rate is payable, which had been the case in the past, continues to cause harassment to the patients like Mr. TDS and Mr. TCS, the Government has now added a more fire to fire in the burning fire causing more discomfort in the polluted atmosphere in the comfortable carrying on of business, trade or commerce in this country. In case of continuous failure, the interest is payable in accordance with the order made by the Assessing Officer, also add more woe and sorrow and adds to the discomfort already experience by Mr. TDS and Mr. TCS.


Mr. TDS and Mr. TCS are well advised to go to specialist of tax advocates, chartered accountants and check their past records and ensure that all transactions are accounted properly so that no day to day infringement of any procedural provisions relating to tax deduction at source/tax collection at source are ignored. The patients are further advised periodically to visit their demigods, namely, their tax consultants to ensure that feedback is given on month on month basis so that there is no wrong that was committed by expiry of timelines to comply the substantive provisions of law both going hand in hand with that of the procedural provisions to insulate themselves from the disease of tax default and they should change their alias name, from that of tax defaulters to that of tax compliers, so that the tax authorities will receive them with fruits and bouquet as an outgoing patient from the fold of the doctor namely the Finance Minister. To maintain high standards of profession, the necessary Doctor’s fee has been paid by the citizens at large as contributions to the exchequer towards tax which is not a pie more not a pie less as held by the Madras High Court in CIT vs. India Express (Madurai) Pvt. Ltd., [(1983) 104 ITR 705 (Madras) by stating that Income tax cases are not akin to a lis but involves only adjustment of proper tax liability as per the Income Tax Act, 1961.

It is too tempting to quote Justice Patanjali Shastri in Dubash’s executors vs. CIT (1951) 19 ITR 182, 189 (SC)“The income tax act directs its attention primarily to the person who receives the income, profits or gains rather than to the ownership or enjoyment thereof….. It is also worthy of note that in several instances persons who have no proprietary or other right in the income charged to tax are made liable to pay the tax for no other reason than the convenience of assessment and collection.” In conclusion the amendments to TDS and TCS is aimed at convenience of assessment and collection and not meant to reduce the rigour of complicated procedural and substantive impact of the stated provisions in the budget relating to tax deduction at source. We only say bid farewell to Mr. TDS and Mr. TCS. Please go home and try to catch some sleep if you can till end of March by the time the Finance Bill becomes the Finance Act. All the very best.

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