Finance Bill 2020 : Impact on Compliances

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The Budget presented on Feb 1, 2020 was a mixed bag as far easing of compliance burden was concerned. This blog describes budget provisions related to compliances under direct tax for business tax payers.

Compliance burden reduced

Tax Audit

  • Currently businesses having gross turnover of Rs. 1 Crore or more are liable to get their accounts audited
  • This limit is proposed to be increased to Rs 5 Crore. However this increase comes with two conditions. 1) Cash receipts should not be more than 5% of total receipts. 2) Cash payments should not be more than 5% of total payments

Tax Audit Filing and Return File Dates

  • Currently due date of filing tax audit report and income tax return is same
  • The proposed change has one month gap between the two. So due date for filing tax audit report is 30th Sept , while return filing date is 31st October.

Increase in Compliances

Dividend Distribution : Liable for TDS

  • Distribution of dividend on shares and mutual funds will be liable to deduction at source @ 10%

Co-operative Societies : TDS on Interest Payments

  • Currently a co-operative society (other than a co-operative bank) is not liable to deduct tax at source on interest paid to a member or to any other co-operative society
  • The Finance Bill proposes that a co-operative society having gross receipts or turnover of Rs. 50 Crore or more in the previous financial year will be required to deduct tax at source on interest.

E-Commerce Operators : TDS on Sales by participants

  • E-commerce operators ( e,g, Amazon, Flipkart ) will be required to deduct tax at source @ 1% on sale of goods or services done by participants on their platform
  • However participants who are individuals /HUF and having gross sales with the e-commerce operator of upto 5 Lakh in a year will not be liable to such TDS

Tour Operators : TCS on foreign tours

  • Sale of foreign tour will be liable to tax collection at source @ 5%. This goes up to 10% in case buyer does not submit PAN.

Sale of Goods : TCS on certain transactions

  • Seller of goods is required to collect tax at source @ 0.1% ( 1% in case buyer does not submit PAN ) if sale consideration in a financial year exceeds Rs. 50 Lakhs
  • Only sellers having gross turnover of Rs. 10 Crore or more are liable to collect tax at source

Overseas remittances : TCS on certain transactions

  • An authorised dealer remitting amount overseas over Rs. 7.50 Lakhs in a year under Liberalised Remittance Scheme of RBI will be required to collect tax at source @ 5% ( 10% in case remitter does not submit PAN)

Charitable Institutions

  • Approvals for registration and tax exemptions will have to be made on recurring basis and not one time
  • Statement showing all donations will have to be submitted on yearly basis.


It is apparent that whole lot of compliance burden has been added to several categories of tax payers in respect of TDS and TCS. Each TDS / TCS compliance entails

  • Correct deduction / collection
  • Deposit with Government
  • Filing Quarterly Statements
  • Issuing Certificates

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