A FEW RECENT DIRECT TAX AMENDMENTS - IS IT A CASE OF MISTRUST

It has now become a saddening trend of laws changing so frequently on the assumption that there is no intelligent life outside the North Block. An even more disturbing trend which is neither fair nor in the national interest that law is made to bear hard on a large number of taxpayers merely in order to get a few dishonest ones. As Nani Palkhivala once remarked, “It is not right that so much should be inflicted on so many in order to rope in a few.”

- Adv Sherry Samuel Oommen

The Government has been steadily increasing the scope of withholding taxes, albeit ensuring punitive rates of withholding taxes for non-filers. For starters, Finance Act, 2021 introduced a provision, namely, section 206AB in the Income-tax Act, 1961 (“the Act”) which requires a payor to deduct taxes at the higher of the following rates on any sum or income or the amount paid, payable or credited by the payor in the case of a “specified person”:

• At twice the rate specified in the relevant provision of the Act;

• At twice the rate or rate in force; or

• At the rate of 5 percent.

The objective for the introduction of the said provision has been stated in the Memorandum to the Finance Bill, 2021, which states as follows:

“Section 206AA of the Act provides for a higher rate of TDS for non-furnishing of PAN. Similarly, section 206CC of the Act provides for a higher rate of TCS for non-furnishing of PAN. It is seen that while these provisions have served their purpose in ensuring obtaining and furnishing of PAN by various person, there is a need to have similar provisions to ensure filing of return of income by those people who have suffered a reasonable amount of TDS/TCS.

Hence, it is proposed to insert a new section 206AB in the Act as a special provision providing for a higher rate for TDS for the non-filers of the income tax return. Similarly, it is proposed to insert a section 206CCA in the Act as a special provision for providing for a higher rate of TCS for non-filers of income-tax return.”