The Union Budget has introduced a series of tax simplification measures, with significant implications for Tax Collected at Source (TCS) compliance. Ravi Agarwal, Chairman of the Central Board of Direct Taxes (CBDT), has hinted at the potential decriminalisation of delays in TCS filings, following similar reforms made for Tax Deducted at Source (TDS).
Currently, delays in filing TCS are classified as criminal offences. However, the Finance Bill is expected to propose relief similar to the recent amendments for TDS, which aim to ease compliance burdens on taxpayers. Agarwal stated, “For TCS also, we may do that (decriminalisation for delayed payment). We will take care of that, and may make appropriate amendments in the Finance Bill. We will make a decision soon,” in an interview with a renowned portal.
The Union Budget has already allowed for payments to be made up to the filing deadline for TDS returns, thereby reducing the compliance burden for taxpayers. This relaxation is being considered for TCS filings as well, addressing industry demands for similar relief.
TDS is applicable to various payments such as salaries, professional fees, brokerage, and commissions, while TCS pertains to taxes collected by sellers during transactions. The proposed changes would align TCS compliance measures with those recently implemented for TDS, potentially easing penalties for delayed payments.
Previously, the Finance Bill included provisions for decriminalising late TDS payments, with Section 276B of the Income Tax Act stipulating imprisonment and fines for non-compliance. However, Budget 2024 has relaxed these provisions, provided that TDS amounts are deposited before the quarterly return deadlines: July 31, October 31, January 31, and May 31.
Om Rajpurohit, Director at tax advisory firm Moore-Singhi, noted, “Budget 2024 has granted a significant relaxation with a caveat if the amount so deducted is deposited before filing of quarterly TDS returns. A similar relief could be beneficial for TCS deposits as well.”
The potential decriminalisation of delayed TCS filings represents a significant shift in tax compliance, reflecting the government's ongoing efforts to simplify tax processes and reduce the burden on taxpayers. The final decision on these measures will be confirmed in the upcoming Finance Bill.
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