Justification-Report-for-TDS

CBDT Amends Rule 31A and TDS Return Forms 26Q & 27Q

CBDT Amends Rule 31A and TDS Return Forms 26Q & 27Q

CBDT vide Notification No. 43/2020 dated 3rd July 2020 has made certain amendments in the present Rule 31A of the Income Tax Rules, 1962 with respect to the furnishing of TDS returns in Form 26Q and Form 27Q.

Here is the list of amendments made in the Rule 31A.

1. Rule 31A(4)(viii) amended to include the transactions where tax has been deducted at a lower rate

Finance Act 2020 had amended Section 197A(1F) to allow for a lower deduction of tax in certain cases. Prior to the amendment the said section only provided for non-deduction of tax in certain cases. Rule 31A(4) prescribes the list of particulars that a deductor is required to furnish in the statement of deduction of tax. 

The present clause (viii) of the said rule prescribes that a deductor shall furnish the particulars of the amount paid or credited on which no tax has been deducted in accordance with notification issued under Section 197A(1F). An amendment has been made to said clause (viii) to direct the deductor to include details of all those transactions where tax has been deducted at a lower rate. The amendment is consequential to the amendment made under Section 197A(1F).

2. Existing Rule 31A(4)(ix) amended to incorporate the amendments in Section 194N relating to deduction of tax on cash withdrawals

Section 194N deals with the deduction of tax on withdrawal of cash in excess of a specified limit. The section had been substituted by Finance Act 2020 and amendments were made to provide for additional and stricter provisions for deduction of tax on cash withdrawals by the non-filers of income tax returns. The amendments were also made to provide for various clauses in which either the deductions of tax shall not be made or shall be made at lower rates as may be prescribed by the government by way of notifications. 

The present clause (ix) of Rule 31A(4) has been substituted with the following clause in line with the amendments made in Section 194N. The substituted clause states as under:

“furnish particulars of amount paid or credited on which tax was not deducted, or deducted at lower rate in view of the notification issued under second proviso to section 194N or in view of the exemption provided in third proviso to section 194N or in view of the notification issued under fourth proviso to section 194N.”

3. Four new clauses have been added in Rule 31A(4) after clause (ix) to furnish the details of transactions where tax has been not deducted or deducted at a lower rate:

ClauseDescriptionThe relevant section in relation to which the clause has been inserted
(x)“Furnish particulars of amount paid or credited on which tax was not deducted or deducted at lower rate in view of the notification issued under sub-section (5) of section 194A”Section 194(5) had been inserted by Finance Act 2020 to empower the Central Government to notify such payments to such classes of person/(s) from which deduction of tax shall not be made or made at a lower rate  
(xi)furnish particulars of amount paid or credited on which tax was not deducted under sub-section (2A) of section 194LBA”Section 194LBA(2A) inserted by Finance Act 2020 provides that no deduction of the tax shall be made by a business trust from the dividend distributed to the unitholders of business trust in a case where the special purpose vehicle has not exercised the option available under Section 115BAA
(xii)“furnish particulars of amount paid or credited on which tax was not deducted in view of clause (a) or clause (b) of sub-section (1D) of section 197A”Section 197A(1D) provides that no deduction of tax shall be made by an Offshore Banking Unit from the interest payments to a person being a non-resident or not ordinarily resident in India
(xiii)“furnish particulars of amount paid or credited on which tax was not deducted in view of the exemption provided to persons referred to in Board Circular No. 3 of 2002 dated 28th June 2002 or Board Circular No. 11 of 2002 dated 22nd November 2002 or Board Circular No. 18 of 2017 dated 29th May 2017”

Circular No. 3/2002: It provides an exemption from deduction of tax under sections 193, 194A, and 194K of the Income Tax Act on the payments of incomes to Ramakrishna Math and Ramakrishna Mission whose income is exempt under section 10(23C)(iv) of the Income Tax Act.

Circular No. 11/2002: It extended the exemption provided under Circular No. 3/2002 to provide that incomes being interest on all securities under section 193 may be paid to Ramakrishna Math and Ramakrishna Mission without tax deduction.

Circular No. 18/2017: It allows payments to be made to certain specified institutions without deduction of tax.

The notification also contains the amended version of Form 26Q and Form 27Q. To view the copy of the notification you may click here. Read further to understand the changes in the forms.

Changes in Form 26Q 

1. Following sections have been inserted in the form so that the details of transactions relating to such sections can be added:

SectionNature of PaymentSection Code
194KIncome in respect of units94K
194NPayment of certain amounts in cash94N
194N First ProvisoPayment of certain amounts in cash to non-filers94N-F
194OPayment of certain sums by the e-commerce operator to e-commerce participant94O

2. Section code for section 194J has been divided into 2 parts to give effect to two different rates of 2% and 10% as provided by amendments in section 194J by Finance Act 2020:

SectionNature of PaymentSection Code
194J(a)Fees for technical services (not being professional services), royalty for sale, distribution or exhibition of cinematographic films and call center @2%94J-A
194J(b)Fee for professional service or royalty etc. @10%94J-B

3. The remarks and their codes for lower or non-deduction of tax have been amended in line with the amendments made in Rule 31A vide this notification.

4. Columns have been added in the annexure to furnish details in respect of cash withdrawn by a resident on which tax is being deducted pursuant to the provisions of Section 194N.

Changes in Form 27Q

1. Following sections have been inserted in the form so that the details of transactions relating to such sections can be added:

SectionNature of PaymentSection Code
194NPayment of certain amounts in cash94N
194N First ProvisoPayment of certain amounts in cash to non-filers94N-F

2. Columns have been added in the annexure to furnish details in respect of cash withdrawn by a non-resident on which tax is being deducted pursuant to the provisions of Section 194N.

3. The remarks and their codes for lower or non-deduction of tax have been amended in line with the amendments made in Rule 31A vide this notification.

Post by Niti Gupta

Niti Gupta is a Chartered Accountant who has experience working with different industries. She loves to write about anything and everything, but majorly research and write about finance and taxation.