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withholding tax: Govt extends validity of lower withholding tax orders by 3 months till June due to COVID-19

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New Delhi: The Finance Ministry on Tuesday extended the validity of all lower withholding tax orders by three months till June 30 in view of hardships caused due to COVID-19 pandemic. The Central Board of Direct Taxes (CBDT) in its order gave a major relief to taxpayers whose application for lower or nil deduction of TDS/TCS is pending for disposal saying that cases where the application is pending and where such certificates were issued for fiscal 2019-20, the validity of the certificates would get extended to June 30, 2020.

In cases where assessees have not been able to apply for such lower/nil deduction certificate for fiscal 2020-21 but were issued such certificates for 2019-20, such certificates will be valid till June 30, 2020.

In cases where the assessee has not applied for issuer of lower or nil deduction of TDS/TCS and does not have any certificate for 2019-20, the CBDT has prescribed a modified procedure for application and consequent handling by the assessing officer.

The order also prescribes a 10 per cent withholding tax rate on payments to Non-Residents (including foreign companies) having Permanent Establishment in India and not covered by the above scenarios) till June 30 or disposal of application, whichever is earlier.

The CBDT said due to the outbreak of COVID-19 there is severe disruption in the normal working of almost all sectors, including functioning of the Income Tax Department.

“In such a scenario, the application fuled by the payees u/s 195 and 197 of the Act for lower or nil rate of deduction of TDS and applications by buyers/licensees/lessees u/s 206C(9) of the Act for lower or nil rate of collection of TCS for fiscal 2020-21, have not been attended in a timely manner by the TDS/TCS-assessing officers, causing hardship to taxpayers,” it said.

The CBDT further said that considering the constraints of the field officers in disposing of the applications and to mitigate hardships of payees and buyers, the I-T department has extended the validity of lower withholding orders till June 30, 2020, from March 31, 2020.

Nangia Andersen Consulting Chairman Rakesh Nangia said this will ensure continuity of payments to contractors/ service providers, both resident as well as non-resident, where for specific reasons such as character of income, tax treaty benefits, estimated losses, etc, respective taxpayers were authorised to receive payments, either without deduction of taxes or deduction at a lower rates.

“Such orders are very important for cash flow management of both resident as well as non-resident taxpayers, and in present circumstances, where taxpayers and businesses are already facing severe liquidity and cash flow issues, such extension is a much welcome step by Government,” Nangia added.


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