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July 7, 2020

CBDT amends Rule 31A, Form 26Q and Form 27Q

CBDT amends Rule 31A, Form 26Q and Form 27Q

The Central Board of Direct Taxes (CBDT), vide Notification No. 43/2020 dated 3rd July, 2020 has made certain amendments to Rule 31A, Form 26Q and Form 27Q. After introducing new TDS rates for high-value cash withdrawals from banks, the income tax department has now amended TDS rules further to tighten the loop and seek more disclosures.

Amendments to Rule 31A

Rule 31A of the Income Tax Rules is related to furnishing of ‘Statement of TDS’ under section 200(3) of the Income Tax Act, 1961

In rule 31A(4) prescribes certain rules for the deductor at the time of preparation of Statement of TDS. CBDT has come up with the following amendments regarding the same:

ClauseBefore AmendmentAfter Amendment
viiiDeductor shall furnish particulars of amount paid or credited on which tax was not deducted in view of the notification issued under sub-section (1F) of section 197A.Deductor shall furnish particulars of amount paid or credited on which tax was not deducted or deducted at a lower rate in view of the notification issued under sub-section (1F) of section 197A
ixDeductor shall furnish particulars of amount paid or credited on which tax was not deducted in view of the exemption provided in clause (iii) or clause (iv) of the proviso to section 194N or in view of the notification issued under clause (v) of the proviso to section 194NDeductor shall furnish particulars of amount paid or credited on which tax was not deducted or deducted at lower rate in view of the notification issued under second proviso to section 194N or in view of the exemption provided in third proviso to section 194N or in view of the notification issued under fourth proviso to section 194N

CBDT has also inserted new clauses to Rule 31A(4)

  • Clause (x) – Deductor shall furnish particulars of amount paid or credited on which tax was not deducted or deducted at lower rate in view of the notification issued under section 194A(5)
  • Clause (xi) – Deductor shall furnish particulars of amount paid or credited on which tax was not deducted under section 194LBA(2A).
  • Clause (xii) – Deductor shall furnish particulars of amount paid or credited on which tax was not deducted in view of section 197A(1D)(a) and section 197A(1D)(b)
  • Clause (xiii) – Deductor shall furnish particulars of amount paid or credited on which tax was not deducted in view of the exemption provided to persons referred to in Board Circular No. 3 of 2002 dated 28th June 2002 or Board Circular No. 11 of 2002 dated 22nd November 2002 or Board Circular No. 18 of 2017 dated 29th May 2017.

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Amendments in Form 26Q

  • New sections 194K, 194-O, 197A is inserted in Form 26Q

In the principal rules, in Appendix II in form 26Q, CBDT has come up with the following amendments regarding the same:-

Before AmendmentAfter Amendment
See sections 192A, 193, 194, 194A, 194B, 194BB, 194C, 194D, 194DA, 194EE, 194F, 194G, 194H, 194-I, 194J, 194LA, 194LBA, 194LBB, 194LBC, 194N and rule 31ASee sections 192A, 193, 194, 194A, 194B, 194BB, 194C, 194D, 194DA, 194EE, 194F, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194N, 194-O, 197A and rule 31A
  • Section 194J is divided into two parts to incorporate the amendments in section 194J by the Finance Act, 2020 of two different rates of 2% and 5%.
  • New validation Codes or flags are provided for reporting of reasons for non-deduction or lower deduction of tax-
  • Write “A” if “lower deduction” or “no deduction” is on account of a certificate under section 197.
  • Write “B” if no deduction is on account of declaration under section 197A other than the cases mentioned in sub-section (1F) of section 197A.
  • Write “C” if deduction is on higher rate on account of non-furnishing of PAN by the deductee/payee.
  • Write “D” if no deduction or lower deduction is on account of payment made to a person or class of person on account of notification issued under sub-section (5) of section 194A.
  • Write “E” if no deduction is on account of payment being made to a person referred to in Board Circular no. 3 of 2002 dated 28 th June, 2002 or Board Circular no. 11 of 2002 dated 22nd November, 2002 or Board Circular no. 18 of 2017 dated 28th May, 2017.
  • Write “Y” if no deduction is on account of payment below threshold limit specified in the Income-tax Act, 1961.
  • Write “T” if no deduction is on account of deductee/payee being transporter. PAN of deductee/payee is mandatory [section 194C (6)].
  • Write “Z” if no deduction or lower deduction is on account of payment being notified under section 197A (1F).
  • Write “M” if no deduction or lower deduction is on account of notification issued under second proviso to section 194N.
  • Write “N” if no deduction or lower deduction is on account of payment made to a person referred to in the third proviso to section 194N or on account of notification issued under the fourth proviso to section 194N.
  • Write “O” if no deduction is as per the provisions of sub-section (2A) of section 194LBA.

Amendments in Form 27Q

  • New sections 194N and 197A is inserted in Form 27Q

In Form 27Q, CBDT has come up with the following amendment regarding the same:-

For the brackets, words, figures and letters “[See sections 194E, 194LB, [194LBA, 194LBB, 194LBC], 194LC, 195, 196A, 196B, 196C, 196D, and rule 31A]” the brackets, words, figures and letters “[See section 194E, 194LB, [194LBA, 194LBB, 194LBC], 194LC, 194N, 195, 196A, 196B, 196C, 196D, 197A and rule 31A]” shall be substituted:

  • New validation Codes or flags are provided for  reporting of reasons for non-deduction or lower deduction of tax-
  • Write “A” if “lower deduction” or “no deduction” is on account of a certificate under section 197.
  • Write “C” if grossing up has been done.
  • Write “D” if deduction is on higher rate on account of non-furnishing of [Permanent Account Number or Aadhaar Number] by the deductee.
  • Write “O” if no deduction is in view of sub-section (2A) of section 194LBA.
  • Write “M” if no deduction or lower deduction is on account of notification issued under second provison to section 194N.
  • Write “N” if no deduction or lower deduction is on account of payment made to a person referred to in the third proviso to section 194N or on account of notification issued under the fourth proviso to section 194N.
  • Write “G” if no deduction is in view of clause (a) or clause (b) of sub-section (1D) of section 197A

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