V. P. Gupta, Advocate 

Finance Bill, 2023 has proposed certain amendments in provisions of TDS and TCS contained in Income Tax Act. The Amendments proposed are being discussed herein.

1. Increase in rate of TCS on certain remittances

   Section 206C provides for collection of tax at source from certain receipts / remittances. Sub-section (1G) was inserted in the Income Tax Act vide Finance Act, 2020 to provide for TCS on remittances made out of India under Liberalised Remittance Scheme of RBI and for the purpose of purchase of overseas tour program package. In case of remittance under LRS Authorised Dealer and in case of overseas tour package the seller, the relevant travel agent has to collect TCS from the person making remittance or purchasing tour package. Presently, rate of TCS is 5% and that is also applicable on remittance in excess of Rs.7 lacs, except in case of overseas tour package in which case TCS @ 5% is to be collected without any threshold exemption. Provisions are proposed to be amended to increase the rate of TCS and also withdraw the threshold limit of Rs.7 lacs in certain cases. The current and proposed position is as under: – 

   Sl. No.	Type of remittance	Present rate	Proposed Rate
   1.	For the purpose of any education, if the amount being remitted out is a loan obtained from any financial institution as defined in section 80E.	0.5% of the amount or the aggregate of the amounts in excess of Rs.7 lacs.	No change.
   2.	For the purpose of education, other than the case referred in point no.1 above or for the purpose of medical treatment.	5% of the amount or the aggregate of the amounts in excess of Rs. 7 lacs.	No change.
   3.	Overseas tour package	5% without any threshold limit.	20% without any threshold limit.
   4.	Any other case	5% of the amount or the aggregate of the amounts in excess of Rs. 7 lacs.	20% without any threshold limit.

   In view of the proposed amendment rate of TCS on purchase of overseas tour package would be 20% as against 5% at present. Further in case of remittances under LRS other than for the purposes of education and medical treatment also rate applicable will be 20% without any threshold limit. 

   It may be stated in this regard that rate of 20% is very high and unreasonable. The intention of the government to introduce TCS on these remittances was to bring the same on record and ensure that remittances have been made out of taxable income. The purpose was being fulfilled by the rate of 5% itself. Accordingly, the government should reconsider and rate should continue to be 5% as at present.

   This amendment will take effect from 01.07.2023, meaning thereby remittances made on or after the above date will be subject to the new provisions. 

2. Provision for carry back TDS to relevant earlier year

   Section 199 of the Act read with Rule 37BA provides for grant of credit for TDS in the year in which relevant income has been offered for tax by the assessee. In many cases income is accounted for by an assessee on accrual basis and same is also included in taxable income whereas tax is deducted at source by the payer in a later year. There is no provision in the Income Tax Act to carry back such amount of TDS and allow benefit of the same in earlier year in which income has been offered for tax. It is creating difficulty to the assesses in getting credit for TDS deducted by the payer in later year whereas income has already been offered for tax in an earlier year. Sub-section(20) is being inserted in section 155 of the Act to provide that where an income has already been included in the return furnished by an assessee u/s 139 for an earlier assessment year and tax on such income has been deducted at source and paid to the credit of Central Government in a later year, the Assessing Officer shall on an application made by the assessee in the prescribed form, shall amend the assessment order or the intimation allowing credit for such TDS in the relevant earlier assessment year. Such application, however, is to be made within a period of two years from end of the financial year in which such tax has been deducted at source. It has also been provided that time limit of 4 years provided in section 154 for rectification of the relevant order shall be reckoned not from the date of order but from end of the financial year in which such tax has been deducted.

   Provisions of section 244A are also being amended in this regard. As per above section interest is allowable on any refund on account of TDS from 1st April of the relevant year to the date of grant of refund. In the case of grant of refund as a result of carry back of TDS interest will be allowable not from the 1st April of the relevant year but from the date of making such application till the date of granting the refund.

   The aforesaid amendment will still not resolve difficulty in case of assesses in whose cases deductor has after deducting tax has either not deposited the same or has deposited late. An assessee can claim credit for TDS only for the amounts reflected in 26AS while filing the return of income. Return is also processed and credit is also allowed only for that amount vide intimation or assessment order. In case deductor has either defaulted in depositing TDS or has not deposited till the date return is filed by the assessee he cannot claim credit for TDS. Even if TDS has been deposited subsequently by the deductor he will revise his TDS statement of the relevant year. Accordingly, claim can be made by the assessee only in that relevant year for which the assessment has already been completed or intimation has been issued. The aforesaid case is still not covered by the amended provision. Therefore, further amendment is required also to cover cases for grant of credit of TDS where deductor has deposited the tax belatedly. Credit to assesses should also be granted in all cases where deductor has deducted even if he has defaulted in depositing the tax. It is the responsibility of government to take necessary action against the deductor to ensure that tax deducted by him is deposited with the government. 

3. TDS on online games

   A new section 194BA is proposed to be inserted in the Act to provide for deduction of tax at source on any income by way of winning from online games. Tax is to be deducted on any withdrawal made during the year and also on the balance of net winnings remaining at the end of the financial year. Rate of tax for deduction would be 30% which rate has also been provided for taxability of winnings from online game in section 115BBJ , which section is also proposed to be inserted. New provisions will come into force with effect from 01.07.2023. 

4. Amendments in section 194B and 194BB

   Section 194B provides for deduction of tax at

   source from winnings from lottery, crossword puzzles or card game or other game. Similarly, section 194BB provides for deduction of tax at source from winning from horse race. Tax is required to be deducted @ 30% in case an amount of winning exceeds Rs.10,000/-. Following amendments are proposed to be made in these sections: –

   1. A proviso is proposed to be inserted in section 194B so as to exclude from the scope of this section winning from online game on or after 01.07.2023. This amendment is proposed since a new section 194BA is being inserted to provide for deduction of tax at source on winning from online games.
   2. It is proposed to provide that deduction under both the sections will be made in case aggregate amount from winnings during the year exceeds Rs.10,000/- instead of deducting tax from each winning. 
5. Extending the scope of certificate for low or nil rate of TDS

   Section 197 empowers the Assessing Officer to issue certificate of TDS at the lower or nil

   rate in respect of payments specified in the sections mentioned in above section. Scope of section 197 is being extended to provide that Assessing Officer will also be empowered to issue certificate for TDS at lower or nil rate in the case of interest income payable to non- resident unitholders in case of business trust as per section 194LBA. The above section provides for deduction of tax at source @ 10% in case of certain income and @ 5% in respect of interest income. 

6. Amendment in section 193 to remove exemption for TDS on interest on listed debentures

   Section 193 of the Act provides for deduction of tax at source from interest on securities. Proviso to above section list out certain securities in which cases TDS is not required to be deducted. Clause (ix) of the Proviso to section 193 provides for exemption from TDS payment of interest on any security issued by a company, where such security is in a dematerialised form and is listed on a recognised stock exchange. The government is of the view that provision is being misused and there is under reporting of interest income by the recipients due to TDS exemption. Therefore, clause (ix) is proposed to be deleted with effect from 01.04.2023. As a result, tax will also be required to be deducted u/s 193 of the Act on interest payable on such securities, including listed debentures. 

7. Amendment in section 196A to provide tax treaty benefit

   Section 196A provides for TDS on payment of certain income @ 20%. In view of specific rate provided in section benefit of lower rate of tax provided in tax treaty cannot be allowed by the deductor. With a view to provide relief to non- resident recipients of income section is being amended to provide that tax will be deducted @ 20% or at the rate provided in tax treaty, whichever is lower.  

8. Amendment in Section 192A of the Act providing for TDS on accumulated balance due to an employee

   Section 192A provides for TDS on payment

   of accumulated balance due to an employee under the employees’ provident fund scheme @ 10 % of taxable component of the payment due to the employee. Tax, however, is not required to be deducted in case amount of such payment is less then Rs.50,000/-. It has further been provided in the section that in case employee does not furnish his PAN tax is to be deducted at maximum marginal rate. The aforesaid provision providing for TDS at maximum marginal rate is being deleted. As a result, now general provisions of section 206AA will be applicable in case employee, who does not furnish PAN and accordingly, tax will be deductible @ 20% instead of maximum marginal rate.

9. Amendments in sections 206AB and 206CCA to exclude persons not required to file return from the category of non-filers.

Provisions of sections 206AB and 206CCA provides that tax should be deducted / collected at twice the rate specified in relevant provisions of the Act or rates in force or @ 5%, whichever is higher in the case of the assesses, who have not filed their return of income for immediately preceding financial year in which tax is required to be deducted and time for furnishing the return of income under section 139(1) has already expired. Provisions of sections 206AB and 206CCA are proposed to be amended to exclude the assesses from such category who are not required to file their return of income. In other words, above provisions providing for higher rate of TDS will not be applicable in the case of assessee who have been exempted from filing their return of income.