By Shailesh Kumar
Whilst THE GOVERNMENT has presented a brave expansionary price range, proposing huge improve in expenditure beneath numerous heads,it has continued its efforts to improve taxpayers/ tax filers base and introduced numerous provisions to increase tax compliance.
TDS at larger price
One of such provisions, introduced in the Budget is Section 206AB in Income Tax Act, which supplies that now buyers/ payers will require to deduct larger price of TDS (as higher as twice the standard price, topic to minimum 5% TDS price) from their vendors, if such vendors have not filed their ITR for two consecutive years instantly preceding the relevant monetary year, for which due date for filing the ITR is currently expired and aggregate quantity of TDS/ TCS for such vendor in every of these two years is at least Rs 50,000. Similar provision is introduced as Section 206CCA, for the TCS.
The new provisions of Section 206AB/ Section 206CCA are applicable on all non-salary payments, except specific incredibly restricted distinct provisions exactly where TDS is necessary to be deduced on winnings from lottery, winnings from horse races, revenue from investment in securitisation trust or TDS on money withdrawals from banks (introduced final year). The implications of these new provisions could be substantial, as all contractors, freelancers, specialists, brokers, agents, and so forth., would now be necessary to furnish proof of obtaining filed ITR for earlier years to their buyers in order to avail standard price of TDS. In absence of furnishing such proof, the buyers would have no decision but to deduct TDS at double the standard price of TDS, with a minimum 5% price.
Increase in compliance burden
This could improve compliance burden of all the payers drastically, to gather required proof from their vendors, with regards to ITR filed by them for earlier years. Many vendors could not even want to share specifics of their ITR with their buyers. In such a case, either the vendor will have to endure larger TDS or commercially the expense of added TDS could require to be borne by the buyer. Thus, virtually, the new provisions will undoubtedly improve the compliance burden for the taxpayers. It could be noted that non-residents, not obtaining a permanent establishment in India are spared from this provision and hence, NRIs obtaining no presence in India but entitled to obtain non-salary revenue from India could not be impacted by this provision.
The intention of the government seems to be in creating buyers themselves force their vendors to comply with revenue tax provisions and file their ITR and its determination to improve revenue tax compliance. However, it could generate a substantial compliance burden for taxpayers obtaining a massive quantity of vendors, to whom such provisions would apply. We will require to wait and see how sector reacts to this provision and complies with the similar.
The writer is companion, Nangia & Co LLP