DIRECT TAX: KEY AMENDMENTS OF FINANCE (No.2) BILL, 2024 Applicable From 1st October 2024 2024

• Rationalization of Tax Deducted at Source rates

• TDS on sale of Immovable property (Sec. 194-IA)

Section 194-1A provides that any person, being a transferee, responsible for paying to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit/payment, deduct an amount equal to 1 percent of purchase consideration or the stamp duty value of such property, whichever is higher

Threshold limit – No deduction of tax shall be made where the consideration for the transfer of an immovable property and the stamp duty value of such property are both less than Rs. 50,00,000.

AMENDMENT – The above provisions have been amended (with effect from October 1. 2024) to provide that where there is more than one transferor or transferee in respect of any immovable property, then the consideration (for calculating threshold limit) shall be the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors for transfer of such immovable property

• Extending the scope for lower deduction/collection certificate of tax at source [Secs. 197(1) and 206C(9)]

Section 197(1) provides that payments on which tax is required to be deducted under certain sections of Chapter XVII-B, are eligible for certificate for deduction at lower/nil rate. Likewise, section 206C (9) provides that sums on which tax is required to be collected under section 206C(1)/(10), are eligible for collection of tax at lower/nil rate.

AMENDMENT ONE – Under section 194Q, every person (being a buyer), who pays to a resident (being the seller), for the purchase of any goods of the value or aggregate of value exceeding Rs. 50 lakh in any previous year, is required to deduct tax at the rate of 0.1 per cent of such sum (exceeding Rs. 50 lakh). Tax is deductable even if the income of the recipient is negative. In such a case, the recipient is left with no other alternative except to claim a refund after uploading return of income. To facilitate case of doing business and to provide an option to seek a lower/nil TDS deduction certificate, section 197 has been amended (with effect from October 1, 2024)

* AMENDMENT TWO-Identical amendment has been made in the scheme of section 206C(9) to bring sub section (1H) of section 206C in its ambit.

• TDS on buyback of shares.

With effect from October 1, 2024, payment regarding to buy-back of shares will be taxable in the hands of shareholders and the same will not be taxable under section 115QA. For this purpose, sub clause (1) has been inserted to section 2(22). After this amendment, money received by a shareholder on account of buy-back of shares will be treated as deemed dividend and, it will be taxable under section 56(2)(1) under the head “Income from other sources”. No deduction will be allowed from such deemed dividend under section 57.

AMENDMENT– As amount received on buy-back of shares will be treated as deemed dividend, the same will be subject to tax deduction under section 194. Such dividend will be subject to TDS at a rate of 10% u/s 194. (with effect from October 1, 2024).

• Amendment to section 192(2B) – TDS on salary

Under section 192, tax is deductible from an employee’s salary by the person responsible for salary payments. Deductors are required to consider all income-tax provisions pertaining to computation of taxable salary and corresponding tax liability. When an employee provides a declaration of his personal income to the employer (which is optional), the employer will have to take into account not only the salary income but also any other income and the tax already deducted by the payer of that additional income.

AMENDMENT – Currently, there is no provision to claim credit of TCS from employers. Section 192(2B) has been substituted (with effect from October 1, 2024), allowing deductors (employers) to take TCS credit into account while calculating TDS liability under section 192. However, TDS under section 192 cannot be lesser than tax on salary income [which is otherwise deductible without including non-salary (i.e. personal income) declared by the employee and tax deducted/collected by others). To put it differently, TDS under section 192 is higher of the following two options

Option 1 (computation without including other incomes) Tax on (salary income minus house property loss declared by the employee) minus any TDS/TCS reported by other persons.

Option 2 (computation after including other declared incomes) – Tax on (salary income minus house property loss declared by the employee plus any personal income declared by the employee) minus TDS/ TCS reported by the employee.

Only house property loss (declared by an employee along with documentary evidence) will be considered under either of the two options (if the employee pays tax under the regular tax regime), No other loss can be declared for the purpose of tax deduction under section 192.

• Failure to pay TDS to the credit of Central Government

Section 276B provides for prosecution in case of failure to pay TDS/dividend tax to the credit of Central Government. Such person shall be punishable with rigorous imprisonment for a term which shall not be less than 3 months, but which may extend to 7 years and with fine.

AMENDMENT: The aforesaid provisions have been amended (effective from October 1, 2024) to provide for exemption from prosecution to a person (who has not deposited TDS), if the payment of tax deducted in respect of a quarter has been made to the credit of the Central Government at any time on or before the time prescribed for filing quarterly TDS statement.

• Direct Tax “Vivad se Vishwas scheme, 2024”

The Direct Tax Vivad Se Vishwas Scheme, 2024 (hereinafter referred to as VsV Scheme) provides a mechanism to reduce litigation in direct taxes. This will not only benefit the exchequer to recover the blocked revenue but also the taxpayers to save time, energy and resources to be spent on unwanted litigations. Salient features of the VsV Scheme are given below –

Who can avail the benefit under the VsV Scheme: The following persons are eligible for the benefit under the VsV Scheme

1. Person in whose case appeal/writ/special leave petition (filed either by the assessee and/or by income-tax authority) is pending on specified date (i.e. July 22, 2024)
2. A person who has filed his objections before the Dispute Resolution Panel (DRP) under section 144C and no direction has been issued by DRP on or before July 22, 2024
3. A person against whom directions have been issued by DRP on or before July 22, 2024 but the Assessing Officer has not yet passed an assessment order in pursuance of such directions as on or before July 22, 2024
4. A person who has filed an application for revision under section 264 & such application is pending as on July 22, 2024.

• PAN- Aadhaar Linkage 

It will be mandatory to provide only the Aadhaar number in both PAN applications and income tax returns (ITRs).

Amendment will take effect from 1^st October, 2024.