TaxTMI 
TaxTMI 
Harmonizing TDS Provisions for National Savings Instruments in India : Clause 393(3)[S.No. 6] of the Income Tax Bill, 2025 Vs. Section 194EE of the Income-tax Act, 1961
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....ax Act, 1961. The focus of this commentary is on Clause 393(3)[Table: S.No. 6], which pertains to TDS on payments in respect of deposits under National Savings Scheme (NSS) and similar schemes. This provision is intended to replace Section 194EE of the Income-tax Act, 1961. A detailed analysis of each aspect of this new provision will be undertaken, followed by a comparative study with the existing law, highlighting continuities, departures, and the practical impact of the changes. Objective and Purpose The legislative intent behind Clause 393(3)[Table: S.No. 6] is to streamline the TDS mechanism applicable to withdrawals from specified savings schemes, notably those covered u/s 80CCA(2)(a) of the Income-tax Act, 1961, such as the Nationa....
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....rs of an assessee, is exempt from TDS under this provision. B. Key Features and Interpretation * Scope of Application: * The provision applies to payments made in respect of deposits under the National Savings Scheme and similar schemes as defined in Section 80CCA(2)(a) of the Income-tax Act, 1961. This includes schemes notified by the Central Government that are eligible for deduction under Chapter VI-A. * The payer can be any person, including government entities, post offices, banks, or any other institution managing such schemes. * Obligation to Deduct Tax: * The obligation to deduct tax is triggered when the payment is made, irrespective of the mode (cash, cheque, draft, or any other mode). * The deduction must be made at ....
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....mated total income will be below the taxable limit, in which case no TDS is required. * However, the Table under sub-section (6) does not specifically list payments under Clause 393(3)[Table: S.No. 6], suggesting that the general rule of declaration may not apply to these payments. C. Ambiguities and Issues in Interpretation * Definition of "Any Person": The provision uses the term "any person" as the payer, which is broad and could include entities not typically associated with NSS-type payments. Clarity may be required through subordinate legislation or guidelines. * Aggregation Rule: The threshold of Rs. 2,500 is based on aggregate payments during the tax year. The mechanism for aggregation, especially in cases of multiple account....
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....ho are exempt but have TDS deducted in error will need to claim refunds through their income tax returns, leading to delays and administrative burden. * Documentation: Payees must maintain proper documentation to substantiate their claim for exemption or refund, especially in the case of heirs. C. For the Tax Administration * Monitoring and Enforcement: The tax department will need to monitor compliance with the new provision, including correct application of the threshold and exemptions. * Dispute Resolution: The provision may give rise to disputes regarding eligibility for exemption, especially in cases involving heirs or multiple payments. * Data Integration: The new regime offers an opportunity to integrate TDS data with taxpay....
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....ayer Person responsible for payment Any person Rate of Deduction 10% (20% prior to 2016) 10% Threshold Rs. 2,500 per financial year, aggregate basis Rs. 2,500 per tax year, aggregate basis Exemption for Heirs Yes, explicit Yes, explicit (Table under sub-section (4), Sl. No. 19) Exemption for Individuals No general exemption; applies to all payees except heirs Table under sub-section (4), Sl. No. 19, exempts individuals and heirs (potentially broader) Time of Deduction At the time of payment At the time of payment Declaration for No Deduction No explicit provision No explicit listing under declaration table; general rule may not apply Procedural Compliance General TDS compliance under the 1961 Act ....
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....t. * Absence of Declaration Mechanism: * Unlike some TDS provisions which allow payees to furnish declarations for non-deduction (e.g., Form 15G/15H u/s 197A), neither Section 194EE nor the new provision explicitly provides for such a mechanism. This continues under the new regime, maintaining the same compliance approach. * Potential for Ambiguity: * The new provision's broader language regarding exemption for individuals may lead to interpretational disputes, especially if the legislative intent was only to exempt heirs, as under the previous regime. Clarificatory circulars or amendments may be necessary. D. Policy Considerations and Rationale for Changes * Administrative Efficiency: By consolidating TDS provisions and clar....