Section 201 of the Income Tax Act provides that where any person, including the principal officer of a company or an employer who is required to deduct tax at source on any sum in accordance with the provisions of the Act but does not deduct or pay such tax or fails to pay such tax after making the deduction, then such person shall be deemed to be an assessee in default in respect of non-deduction, non-payment or failure to deduction of tax.
The first proviso to sub-section (1) of section 201 specifies that the deductor shall not be deemed to be an assessee in default if he fails to deduct tax on a payment made to a resident but
- Such resident has furnished his return of income under section 139,
- Disclosed such payment for computing his income in his return of income,
- Paid the tax due on the income declared by him in his return of income and furnished an accountant’s certificate to this effect.
Earlier, this relief in section 201 is available to the deductor, only in respect of payments made to a resident. In case of similar failure on payments made to a non-resident, such relief is not available to the deductor.
Now, it is proposed to amend the proviso to sub-section (1) of section 201 to extend the benefit of this proviso to a deductor, even in respect of failure to deduct tax on payment to non-resident. These amendments will take effect from 1st September,2019.
It is also proposed to amend section 40, providing that where an assessee fails to deduct tax on any sum paid to Non-resident, assesse shall not be deemed to be asssessee in default and there will be no disallowance under section 40 in respect of such payments.
This amendment will take effect from 1st April, 2020 and ahll be applicable in from assessment year 2020-21 onwards.