TaxTMI 
TaxTMI 
Transformations in Tax Deduction and Collection Compliance and Reporting in India : Clause 397(1) of the Income Tax Bill, 2025 Vs. Section 203A of the Income-tax Act, 1961
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....ocedural framework for obtaining and quoting a Tax Deduction and Collection Account Number (TDCAN or TAN), a unique identifier pivotal for tracking TDS/TCS transactions. This commentary provides a detailed analysis of Clause 397(1) of the 2025 Bill, comparing and contrasting it with the existing Section 203A of the 1961 Act. The discussion navigates through their legislative intent, operative mechanisms, exceptions, compliance requirements, and the broader implications for stakeholders. Objective and Purpose The primary objective of both Clause 397(1) and Section 203A is to establish a standardized and transparent system for monitoring tax deducted and collected at source. The TDCAN/TAN serves as a crucial compliance tool, enabling the t....
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....d intent are substantially similar, emphasizing the universality of the requirement as a precondition for compliance with TDS/TCS obligations. The 2025 Bill continues this approach, ensuring continuity and clarity for taxpayers. Notable Evolution: Clause 397(1) uses the term "tax deduction and collection account number," aligning with contemporary nomenclature and integrating the TDS and TCS regimes more closely, whereas the 1961 Act, over time, evolved from separate "tax deduction account number" and "tax collection account number" to a unified concept. 2. Quotation of TDCAN/TAN in Documents Clause 397(1)(b) of the 2025 Bill: Once allotted, the TDCAN must be quoted in all challans, statements, certificates, and all documents pertaining ....
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....025 Bill introduces additional statutory exceptions, specifically referencing certain categories of deductors u/s 393(1) and (4). This reflects a more tailored approach, possibly to address administrative practicalities or to exclude classes of transactions where TDS/TCS compliance is otherwise ensured. The explicit statutory carve-outs in the 2025 Bill reduce dependence on executive notifications, enhancing certainty for taxpayers and administrators. 4. Integration with PAN and Enhanced Compliance Framework Clause 397(2) of the 2025 Bill: This sub-clause introduces a comprehensive framework integrating the Permanent Account Number (PAN) with TDS/TCS compliance: * Mandates the furnishing of PAN by recipients/payers of amounts subject t....
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....lessees; * Reporting of payments to non-residents; * Special procedures for government offices; * Correction and updating of statements within six years from the end of the relevant tax year. Section 203A of the 1961 Act: Section 203A is limited to the allotment and quoting of TAN; reporting and correction mechanisms are addressed in other sections (e.g., Sections 200, 206, 206C). Comparative Perspective: Clause 397(3) represents a substantial broadening and consolidation of compliance and reporting requirements. By integrating payment, reporting, and correction mechanisms within a single clause, the 2025 Bill aims to streamline compliance, enhance traceability, and facilitate timely rectification of errors. The provision for correc....
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....ertaining to such transactions. All challans, certificates, prescribed statements/returns, and other prescribed documents. Nature of Account Number Tax deduction and collection account number (consolidated). Tax deduction account number and/or tax collection account number (differentiated in earlier law, now consolidated). Exemptions Detailed, includes certain transactions/persons u/ss 393(1), 393(4), and government-notified persons. Limited to government-notified persons. It is evident that Clause 397(1) builds upon Section 203A by providing more detailed exemptions and aligning the provision with the structure and terminology of the new Bill. The consolidation of deduction and collection numbers into a single account number....
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....requirements, including PAN linkage and correction mechanisms, simplifies procedural obligations but raises the bar for due diligence and timely reporting. The risk of higher TDS/TCS rates for non-furnishing of PAN creates strong incentives for comprehensive KYC processes. * For Individuals: The mandatory furnishing of PAN for all TDS/TCS transactions, and the consequences of non-compliance, heighten the importance of PAN as a universal tax identifier. * For Non-residents: The specific carve-outs for certain non-residents and non-resident entities reflect a balanced approach, accommodating international tax norms and treaty obligations. * For Government Offices: The detailed procedures for reporting and payment without challans addres....