New Delhi, May 14 (IANS): Taxpayers who have not furnished Pan or Aadhaar numbers while filing tax returns will not get the benefit of lower rates of Tax Collection at Source (TCS) and Tax Deduction at Source (TDS), the government has clarified.
As part of Rs 20 lakh economic package, Finance minister Nirmala Sitharaman on Wednesday reduced TDS/TCS for the non-salaried specified payments made to residents by 25 per cent for balance period of FY21. This was done to provide more money into the hands of the taxpayers to deal with the economic situation amid COVID-19 pandemic.
However, it has now been clarified that reduced rates would not be applicable to tax payers who have been denied lower rates (of TCS/TDS) due to non-furnishing of PAN/Aadhaar. The tax is required to be deducted at a rate of 20 per cent or higher for this category of taxpayers as per the provisions of section 206 AA of the Income-tax Act.
As per the government announcement, the reduced rate of TDS will be applicable to payment for contract, professional fees, interest, rent, dividend, commission, brokerage.
This reduction will be applicable for the remaining part of the FY 2020-21 i.e. from Thursday (May 14) to March 31, 2021.
It is estimated that the move will release liquidity of Rs 50,000 crore in the difficult period of Covid-19 pandemic.
TCS is applicable on sale of Tendu Leaves, timber obtained under a forest lease, any other forest produce, scrap, minerals, grant of licence, lease of parking lots, mining and quarrying, sale of motor vehicles, above rates of Rs 10 lakh. The existing rates here vary from 1 to 5 per cent. This now stands reduced between 0.75-3.75 per cent.
The TDS rates vary from 1 to 25 per cent for different segments such as interest in securities, dividend, repurchase of units by mutual funds, payment for acquisition of immovable property, fee for professional or technical services or royalty, income by securitisation trust, TDS on e-commerce participants. This will now stand reduced between 0.75 and 18.75 per cent.
The necessary legislative amendments in this regard shall be proposed in due course, government sources said.