Issue:
Several cases have come to the notice of the Central Government wherein deductors/collectors were held to be an assessee in default for short deduction of TDS/short collection of TCS in cases where final transaction was done before laying of the Finance (No.2) Bill, 2019 in the Parliament, i.e. 5th July, 2019. Since the transaction was completed before the rates of enhanced surcharge were announced and the concerned deductee/payee is required to furnish their Income-tax return for the relevant assessment year, it has been requested that in such cases, deduct or or collector should not be held to be an assessee in default under section 20 I of the Income-tax Act.
The Finance (No.2) Bill,20 19 was tabled in Lok Sabha on 5th July, 2019 which was passed by both the houses of Parliament and became Finance (No.2) Act, 2019 (the Act) which received assent of the President on 1st August, 2019. The Act provided for increase in the rate of surcharge as under:
| S.No. | Income Slab | Surcharge before the Act | Enhanced surcharge as provided by the Act |
| 1 | Less than 50 lakh rupees | Nil | Nil |
| 2 | 50 lakh rupees but less than 1 crorc rupees | 10% | 10% |
| 3 | 1 crore rupees but less than 2 crore rupees | 15% | 15% |
| 4 | 2 crore rupees but less than 5 crorc rupees | 15% | 25% |
| 5 | 5 crore rupees and above | 15% | 37% |
Clarification:
The above issue has been examined by the Board and in this regard, it is clarified a person responsible for deduction/collection of tax under any provision of the Income-tax Act will not be considered to be an assessee in default in respect of transactions where:-
a) such transaction has been completed and entire payment has been made to the deductee/payee on or before 5th July, 2019 and there is no subsequent transaction between the deductor/collector and the deductee/payee in the financial year 2019-20 from which the shortfall of tax could have been deducted/collected by the deductor/collector;
b) TDS has been deducted or TCS has been collected by such deductor/collector on such sum as per the rates in force as per the provisions prior to the enactment of the Act;
c) such tax deducted or collected has been deposited in the account of Central Government by the deductor/collector on or before the due date of depositing the same;
d) TDS/TCS statement has been furnished by such person on before the due date of filing of the said statement.
However, if the person fails to fulfill any of the conditions as laid down above, such a person will, with respect to short deduction/collection, not be eligible for benefit provided under this circular
Further, if the deductor/collector has deducted/collected shortfall of tax after 5 th of July, 2019 from the transaction(s) made subsequently after the said date, interest, if any, for delay in deduction/collection of such tax shall not be levied.
The above 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.