CBDT issues clarification on short deduction of TDS/TCS

The Central Board of Direct Tax vide its notification dated 13th April 2020 has issued Clarification regarding the short deduction of Tax Deduction at Source (TDS)/ Tax Collected at Source (TCS) due to an increase in rates of surcharge by Finance Act, 2019.

The Finance (No.2) Act, 2019 provided for an increase in the rate of the surcharge and it was made applicable from Assessment Year 2020-21 where no surcharge was leviable up to an income of Rs. 50 Lakhs.

But Whereas, several cases have come to the notice of CBDT wherein deductors or collectors were held to be assesse in default for short deduction of TDS/TCS in case where final transaction was done before laying of the Finance (No. 2) Bill, 2019 before the parliament (i.e. July 05, 2019).

Therefore, To mitigate the hardships to taxpayers, CBDT clarifies that a person responsible for deduction or collection of tax will not be considered to be an assessee in default in respect of transactions where:

  • Such transaction has been completed and entire payment has been made to the deductee or payee on or before 5th July 2020
  •  TDS or TCS has been deducted and collected on such sum as per the rates in force prior to the enactment of the Act.
  • Tax deducted or collected has been deposited in the account of Central Government on or before the due date of depositing the same.
  • TDS or TCS statement has been furnished by such person before the due date of filing of the said statement.

The circular further clarified that if any person fails to comply with the provisions, such person will, with respect to short deduction/collection, not be eligible for the benefit provided under this circular.

Click here to read the Notification.