Taxpayers with income of Rs 2 crore and above who have not deposited increased surcharge while calculating their TDS during 2019-20 fiscal will have to do so before filing their income tax returns, the I-T department has said.
The 2019-20 Budget, which was presented on July 5, 2019, had hiked surcharge to 25 per cent for those with income of Rs 2 crore to Rs 5 crore and to 37 per cent for those with income above Rs 5 crore. The rate of surcharge was 15 per cent earlier.
The increased surcharge was applicable from the beginning of the fiscal, or April 1, 2019.
Hence, tax deducted at source (TDS)/tax collected at source (TCS) was required to be deducted/collected after taking into account the enhanced rate of surcharge.
In a clarification, the Central Board of Direct Taxes (CBDT) said several cases have come to its notice wherein deductors/collectors were held to be an assessee in default for short deduction of TDS/short collection of TCS for transaction which happened between April 1 and July 4.
Thus, to mitigate genuine hardships, CBDT has laid down 4-point conditions, upon fulfilment of which the deductor/collector shall be not held as assessee in default. It also provides for interest waiver subject to conditions.
The CBDT also clarified that this relaxation "does not absolve the deductee/payee to pay proper tax including enhanced surcharge by advance tax or self assessment tax and file return of income after paying such tax."
AKM Global Partner Amit Maheshwari said in FY 19-20 due to the increase in surcharge in the Budget, there was shortfall of TDS to the extent of this enhanced surcharge and several notices were issued by the department.
However, there were cases where the entire transaction was completed before July 5, 2019 and there was no pending payments to be made and consequently the deductor did not have a reasonable opportunity to recover the difference.
"For such genuine cases, provided the taxpayer has correctly deposited the tax as per the old provisions and filed the TDS returns on or before the due date, CBDT has clarified that such deductors would not be treated in default and no interest would be levied," Maheshwari added.
Andersen Consulting Director Shailesh Kumar said generally rates of income tax and surcharge for a particular financial year is announced by way of Budget/ Finance Act before start of the relevant financial year.
"However, for Financial Year 2019-20, due to elections, Finance Act was passed in middle of the Financial Year (i.e. July 2019).
Accordingly, there were various transactions, on which TDS was already deducted and deposited before new rates for FY 2019-20 were announced on July 5, 2019," Kumar said.
AMRG & Associates Senior Partner Rajat Mohan said "deductors have been relieved of interest liability, where TDS was not deducted in accordance with the enhanced rate of the surcharge if such defect was cured in the subsequent period."
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