The income tax department has issued clarifications relating to the issue of certificates for a lower deduction, collection of TDS, TCS.

To mitigate the hardships of taxpayers, the Central Board of Direct Taxes (CBDT) on April 9, 2020 provided clarification on orders under Section 119 of the Income-Tax Act, 1961, relating to the issue of certificates for lower deduction/collection of TDS/TCS. Earlier on April 4, 2020, due to outbreak of the Covid-19 pandemic, and in order to mitigate the hardships of taxpayers, the CBDT had issued the directions/clarifications by exercise of its power u/s 119 of the Income-tax Act, 1961 (the Act). The recent clarifications are in response to certain representations made by the taxpayers and those who deduct TDS.

Issue of validity period of lower/nil deduction/collection certificates for FY 2019-20

CBDT stated, “For the purpose of Para 2 (a) and 2 (b) of the order dated March 31, the lower/nil deduction/ collection certificates will be valid for the particular period for which these were issued for FY 2019-20 and also for a further period from April 1 to June 30 for FY 2020-21 subject to conditions as mentioned in the order dated March 31.

For example, if a certificate was issued from a period from 1.10.2019 to 15.12.2019, the same will be valid for FY 2019-20 for the period from 1.10.2019 to 15.12.2019 and for FY 2020-21, the same shall be valid from 01.04.2020 to 30.06.2020 subject to conditions mentioned in the Order dated 30.03.2020.

Threshold/transaction limit mentioned in lower/nil deduction/collection certificate issued for FY 2019-20

For the purpose of Para 2 (a) and 2 (b) of the order dated March 31, the lower/nil deduction/ collection certificates issued for FY 2019-20, will be taken fresh for period from 01.04.2020 to 30.06.2020 for FY 2020-21 and the amount of threshold limit will be the same as was assigned for these certificates for FY 2019-20 subject to conditions mentioned in the Order dated 30.03.2020.

Issue of approval and communication of lower/nil deduction/collection certificate

Here, CBDT has clarified that official emails or other electronic communication may be used by field authorities of Income Tax Department for internal approval for issue of lower/nil deduction/collection certificates and for communication of the same.

Issue of new/different TAN mentioned for lower/nil deduction/collection application for FY 2020-21

CBDT stated, “In case the payee or buyer/licensee/lessee taxpayer had a certificate for a lower deduction for FY 2019-20 and an application has been made for FY 2020-21 for a new/different TAN mentioned in the application, the relaxation as provided in Para 2(a) and 2(b) of the order dated March 31 shall not apply to such cases and they have to apply afresh as per the procedure.

Similarly, if the rates of TDS/TCS mentioned in old certificates are higher and the taxpayer wants a revision of the rates in view of the impact of COVID-19 outbreak on its business, the relaxation as provided in Para 2(a) and 2(b) of the order dated March 31 shall not apply to such cases and they will have to follow the procedure mentioned in the annexure of the order and apply afresh.

The CBDT had also in an earlier direction in order to mitigate the hardships of small taxpayers, had decided that if a person, had submitted valid Forms 15G and 15H to the Banks or other institutions for F.Y. 2019-20, then these Forms would be valid up to 30.06.2020. This will safeguard the small tax payers against TDS where there is no tax liability