E-mail procedure for disposal of pending application of lower withholding of taxes of tax year 2019-20

Income-tax laws (ITL) empower the Tax Authority to give a certificate of lower withholding of taxes if the Tax Authority is satisfied that the total income of the recipient justifies withholding of taxes at any lower rates or no deduction of tax, as the case may be^[2]. For obtaining such certificate, the recipient of income is required to make an application before the Tax Authority in a prescribed form^[3] through TRACES portal^[4] with digital signature or electronic verification code. Central Board of Direct Taxes ^[5] (CBDT) is authorized to prescribe the conditions, procedure and mode under which an application can be made and conditions subject to which certificate may be granted to the recipient.

A similar provision^[6] is present under the ITL for obtaining lower withholding certificate in a case where payment is made to a non-resident, i.e., non-resident payee is required to apply for lower tax deducted at source (TDS) certificate. Also, similar application^[7] may be made by buyer/licensee/lessee in a case where the seller or licensor or lessor is required to collect taxes.

CBDT Order dated 3 April 2020:

Due to global pandemic of COVID-19 and its impact in India, Government of India has taken multiple unprecedented measures including complete lockdown of entire country for 21 days. This has created severe disruption in normal functioning of almost all sectors of the economy including the Tax Authority. Consequently, the applications filed by the taxpayer for obtaining nil/lower withholding certificates are not attended in timely manner by the Tax Authority.

Vide its earlier order dated 31 March 2020, the CBDT granted certain reliefs in respect of pending applications as on 31 March 2020 for tax year 2020-21 as also applications to be made till 30 June 2020 for tax year 2020-21^[8].

Even for pending applications for tax year 2019-20, non-disposal may cause genuine hardship to the taxpayers who have raised invoices for tax year 2019-20 but have not received payments since the deductee is not able to intimate the reduced rate of deduction. It may be noted that time limit for depositing TDS during the month of March is 30 April.

In order to mitigate the genuine hardship of such taxpayers, CBDT has directed/ clarified that:

a.     Cases where taxpayer has timely filed an application for nil/lower withholding of taxes for tax year 2019-20 on TRACES portal and such applications are pending for disposal as on 3 April 2020, the taxpayer shall intimate the Tax Authority (via e-mail) about the pendency of such application along with all the required documents/evidences for filing their application in TRACES portal.

b.      Tax Authority is directed to dispose of such applications (which are intimated via e-mail) on or before 27 April 2020 and communicate the same to the taxpayer. Certificate issued over e-mail shall be applicable for the amount paid/credited during tax year 2019-20 after the date of making of application but remained unpaid till date of issuance of the certificate by the Tax Authority.

c.       Once certificate is issued, the taxpayer being deductee shall share the same with deductee for applying the same.

Comments:

This is very welcome move of the CBDT, in line with reliefs granted for application for lower deduction certificate for tax year 2020-21 as also various relaxation of procedural compliance under the ITL granted by way of promulgation of Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020^[9]. The relief granted in respect of tax year 2020-21, as an interim measure, permits the payer to consider certificate already issued for tax year 2019-20 till disposal of application or 30 June 2020, whichever is earlier. In contrast, for pending applications for tax year 2019-20, the payer needs to wait till 27 April 2020 for disposal of application and, accordingly, deposit the tax due for the month of March 2020 by 30 April 2020. It may be noted that the Ordinance has not extended the time limit for deposit of taxes during the period of disruption but reduced interest for delay to 9% per annum and waived penalty and prosecution