Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Section 201 and section 206C of the Act provides for the consequences when a person does not deduct/ collect, or does not pay, or after so deducting/ collecting fails to pay, the whole or any part of the tax, as required by or under the Act.

2. As per sub-section (3) of section 201 of the Act, there is a time limit of seven years for order made under sub-section (1) of section 201 of the Act deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax where the payee is a person resident in India. However, there is no time limit when there has been a failure to deduct the whole or any part of the tax from a non-resident. This creates uncertainty in the case of non-residents.

3. Similarly for TCS, sub-section (6A) of section 206C of the Act provides the consequences when a person does not collect the whole or part of the tax or after collecting fails to pay the tax as required by or under this Act, he shall be deemed to be an assessee in default.

4. It is proposed to amend sub-section (3) of section 201 and insert new sub-section (7A) in section 206C of the Act to provide that no order shall be made deeming any person to be assessee in default for failure to deduct/ collect the whole or any part of the tax from any person, at any time after the expiry of six years from the end of the financial year in which payment is made or credit is given or tax was collectible or two years from the end of the financial year in which the correction statement is delivered, whichever is later.

5. The amendments will take effect from the 1st day of April, 2025.

[Clauses 69 & 70]

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Full Text:

Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Time limit for deeming assessee in default reduced to six years for deduction and collection; correction statement extends limitation. Amendments to section 201 and insertion of sub section (7A) in section 206C impose a uniform limitation: no order deeming a person an assessee in default shall be made after six years from the end of the financial year in which payment/credit occurred or tax was collectible, or two years from the end of the financial year in which a correction statement is delivered, whichever is later; effective 1 April 2025.