Budget: Amendments pertaining to TDS and TCS - Part III

PROPOSED AMENDMENTS PERTAINING TO TDS&TCS

The existing provisions

Under the provisions of section 201(1A) if the person responsible for deduction of tax at source does not do so or after deducting fails to pay the tax to the Government, he is liable to pay simple interest at the rate of 12% per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. Similarly section 206 C (7) provides that if the seller does not collect the tax or after collecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest at the rate of one percent per month or part, thereof, on the amount of such tax from the date on which such tax was collectible to the date on which the tax was actually paid.

THE AMENDMENT

Clause 42 seeks to insert in sub section (1A) after the words 'such tax is actually paid,' occurring at the end, the words, brackets and figures "and such interest shall be paid before furnishing the quarterly statement for each quarter in accordance with the provisions of sub-section (3) of section 200" with effect from June 1, 2006. Similarly clause 47 seeks to amend sub section 7 of section 206C as under:
1. After the words "tax was actually paid", occurring at the end, the words, brackets and figure "and such interest shall be paid before furnishing the quarterly statement for each quarter in accordance with the provisions of sub-section (3)" shall be inserted with effect from the day of June 1, 2006.

INTERPRETATION

The proposed amendments mandate payment of interest on delayed payment on self-assessment basis. It shall be obligatory on the part of the person deducting or collecting taxes to pay interest on default amount before furnishing the quarterly statement for each quarter in accordance with the provisions of section 200(3) and section 206C (7).

For the word 'seller' the words 'person responsible for collecting tax' is proposed to be substituted with effect from April 1, 2007 in section 206C.

ANNUAL TDS AND TCS RETURNS NOT TO BE FURNISHED

Section 206 provides that every person responsible for deducting tax at source shall, within the prescribed time, after the end of each financial year, prepare and deliver to the prescribed Income Tax Authority, such returns as may be prescribed. Section 206C contains a similar provision in respect of tax collected at source.

It is proposed in the Finance Bill to do away the requirement of furnishing the annual returns of TDS and TCS in respect of tax deducted or collected on or after April 1, 2005. Consequential amendment has been proposed in the penal provision of section 272A. Failure to furnish the annual return for tax collection or deduction before April 1, 2005 shall continue to attract penalty U/s 272A.

With the amendments proposed in section 139A, 272A, 206, 206C&203A, it is proposed to fully replace the existing system of filing of annual return by the system of furnishing of quarterly returns. It is proposed by way of an amendment to section 272A that the penalty that could be levied for failure to deliver the statements shall not exceed the amount of tax collectible or deductible as the case may be.

Under the existing provisions contained in the said section, failure to furnish a return in due time under section 206 or section 206C renders the person, who fails to furnish the return, liable for penalty of a sum of one hundred rupees per every day during which the failure continues.

This amendment will take effect retrospectively from April 1, 2006 and will accordingly apply in relation to the assessment year 2006-07 and subsequent years.

It is proposed to insert a new sub section (6A) so as to deem any person responsible for collecting tax in accordance with the provisions of the said section as assessee in default if such person does not collect the whole or any part of the tax or fails to pay such tax after having collected the tax.

It is further proposed to provide that no penalty shall be charged U/s 221 from such person unless the Assessing Officer is satisfied that the person has without good and sufficient reasons failed to collect or pay the tax.

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