TaxTMI 
TaxTMI 
Comparison of section 394 "Collection of tax at source." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)
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....mited interplay with other tax deduction obligations. The provision affects sellers, authorised dealers, licensors/lessors and buyers; effective/decision date: Not stated in the document. Background & Scope Statutory hook: Clause 394 (Deduction and collection at source) in the Income Tax Bill, 2025. The clause establishes a TCS framework: persons specified in column C of an accompanying Table are obligated to collect tax on receipts in column B at rates in column D and at the time specified in clause (1)(c). The Table enumerates nine receipt types, identifies the collector (seller, authorised dealer, licensor/lessor) and prescribes TCS rates. Definitions: "forest produce" is to have the same meaning as in any State Act for the time being ....
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....er, licensor/lessor), with timing tied to debiting to account or actual receipt - a cash/book nexus that aims to align collection with actual cashflow or accounting recognition. The specified rates signal policy choices: low rates (1-2%) on certain commodities, higher rates (5%/20%) on cross-border remittances and tourism packages to operate as deterrents or pre-emptive collection mechanisms for potential tax leakage. The cross-reference to state definitions for "forest produce" indicates legislative intent to harmonise with existing local regimes rather than introduce a uniform federal definition. Exceptions/Provisos Clause 394(2) exempts collection for buyers who are Indian residents when they furnish a written declaration in duplicate ....
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....al 8 on a related amount, appropriate non-duplication applies (Clause 394(4) in Bill limited to that interaction). * Example 3: A licensor receives Rs.500,000 for permitting use of a private parking lot. Clause 394 (serial 9) prescribes 2% TCS collected by the licensor/lessor at time of debiting/receipt. Interplay Clause 394 interacts with other TDS/TCS provisions of the Bill (not reproduced in the document). Clause 394(5) expressly disapplies collection where the buyer is already liable to deduct tax under other provisions and has done so - a non-cumulation rule. The Bill's reference to "any other provisions of this Act" implies coordination across the deduction-and-collection regime but does not list the specific provisions. The B....
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....ommissioner. The enacted Section 394 requires the person to "deliver or cause to be delivered, one copy of the declaration ... on or before the seventh day of the month following the month of receipt of that declaration." * Practical impact: enacted language adds a compliance timeline (7th day) and a causation clause ("or cause to be delivered") broadening responsibility where a third party may effect delivery; increased procedural clarity and a strict timeline for administrative receipt by the tax authority. * Exception for remittances under LRS and loans for education (sub-section (4)): The Bill's sub-section (4) is limited to excluding collection "on such amount on which tax has been collected by the seller referred to in serial ....
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.... obtain or preserve prescribed declarations, and duplicate collection where overlapping entries (serial 7 and 8) may apply. * Record-keeping/evidence: Collectors should maintain copies of declarations (one copy to be delivered to tax authorities per Bill), evidence of debiting/receipt dates, and documentation to show exemption conditions (e.g., buyer's declaration of end-use). Payment records and ledger entries will be critical to demonstrate correct timing and rate application. Where cross-collection rules apply (serial 7 vs 8), proof of prior collection by the seller will be material to avoid collection by the authorised dealer. Key Takeaways * Clause 394 prescribes TCS on nine specified receipts, allocating collection obligation....