Amendments in TDS/TCS Provisions per Union Budget 2021-22

The  Finance  Bill,  2020  includes  many  provisions  relating  to  amendment  and changes in various TDS and TCS provisions and further introduced many new TDS and TCS provisions in the statute.

In this article we are focusing on following four major amendments as proposed per the Budget 2020-21:

  1. Dividend paid by SPV to Business trusts
  2. TDS on payment made to FII
  3. Insertion of section 194Q
  4. Higher rate of TDS for non-filing of return of Income.

1. Section 194- TDS on Dividends:

Provision relating to deduction of TDS on Distribution of Dividend was introduced and made effective from April 1, 2020 by withdrawing DDT in the Finance Act, 2020. Thus, dividend became taxable in the hands of the recipient. The second proviso to section 194 stated that this section shall not apply if the dividend is paid to insurance company or insurers. The Finance Bill 2021 now proposes to extend this benefit also to business trusts and states that if any dividend is paid/credited to a business trusts
established for special purpose vehicle, no TDS shall be deducted. Thus, SPV is not required to deduct TDS on payment of Dividend to business trusts. This is retrospective amendment from AY 2020-21. Further, TDS will not be deducted in case of payments made to any other person as may be notified by Government.

2.Section 196D- TDS on Income of FII from securities:

The section has been modified to rationalise the provision concerning withholding on payments made to Foreign Institutional Investors (FIIs). Accordingly, it is proposed to insert a proviso to subsection (1) of section 196D of the Act to provide that in case of a payee to whom an agreement referred to in section 90(1) or section 90A(1) applies and such payee has furnished the Tax Residency Certificate as required section 90(4) or section 90A(4) of the Act, then the tax shall be deducted at the rate of 20% or rate/rates of income tax provided in such agreement for such income, whichever is beneficial to FII.

3.Section 194Q- TDS on Purchase of goods over a limit:

In  the  last  Finance  Bill,  section  206C(1H)  was  introduced  according  to which seller was required to collect TCS on sale of goods and this year, a new section 194Q, being TDS on purchase of goods on the similar lines is proposed to be introduced.

a) A buyer, who is responsible for paying any sum to resident (referred as “seller”) for purchase of any goods of the value/ aggregate of such value. exceeding in a previous year of  50 lakhs, shall deduct 0.1% (5% in case of No PAN/ Aadhaar cases) of such sum exceeding  50 Lakhs as income tax,

b) A buyer means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year,

c) If the amount is credited to any account by whatever name called, these provisions shall apply,

However, the Central Government may, by notification in the official Gazette, specify for this purpose, subject to conditions as prescribed in such notification shall be exempted from TDS,
It is also stated that if the transaction is covered for TDS/TCS under any provision  of  the  Act  and  has  deducted  such  amount,  they  shall  be exempted from this provision. Further, if the transaction also falls in the purview of section 206 C (1H) then section 194Q is given preference and Buyer shall be responsible for deducting tax.


4.Section 206AB and Section 206CCA – Higher rate of TDS/TCS for non- filing of return of income:

As  per  section  206AA,  a  higher  rate  of  TDS/TCS  was  deducted  if  the recipient/payee failed to submit PAN/Aadhar cases. New Sections 206AB and Section 206CCA have been proposed in the Finance Bill, which will require  that  the  Deductor/Payer  will  also  have  to  ensure  while  making payment that the “specified person” has also filed the Return of Income for the last two financial years, immediately prior to the financial year in which payment is made. In case of non-filing of Return income, by such resident deductee where the time limit under Section 139(1) has expired and the aggregate TDS and TCS is ₹50,000ormoreineachofthesetwoprevious years,  then  the  TDS/TCS  will  have  to  be  deducted  at  higher  of  the following rates as applicable under that Section in which payment is made:

a)  At twice the rate specified in the relevant provision of the Act, or
b) At twice the rate or rates in force, or
c) At the rate of five percent.

CPC/Government  will  provide  online  verification  mechanism  on  the website of ITD, in due course, which will enable the Deductor/ Payer to verify whether the payee/Recipient has filed the return of Income for the last two years or not.

The above provisions shall not apply to the following sections- 192, 192A,
194B, 194BB, 194 LBC and 194N

By CA Soniya Dashottar

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Disclaimer: This insight is meant for informational purpose only and should not be considered as an advice or opinion.

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Team SFS

An Overview of Companies (CSR Policy) Amendment Rules 2021

An Overview of Companies (CSR Policy) Amendment Rules 2021

1. The Ministry of Company Affairs ‘MCA’ vide Companies (CSR Policy) Amendment
Rules 2021 shifted CSR spending mandatory from the voluntary. In this article, an attempt
has been made to cover all the amendments read with statutory provisions und
of Companies Act, 2013.

Introduction of Definition Of “Corporate Social Responsibility” List of Activities not includible in CSR

Earlier the Inclusive definition of CSR was given in the Act. Now that Inclusive definition has been amended as Exclusive definition and such Exclusive definition clearly specifies the
activities which is not considered as CSR.CSR means the activity undertaken by the company
u/s 135 read with these rules, but shall not includes the following:


Every entity who is covered under these rules, who intends to undertake any CSR activity, shall  register itself with the CG by filing the e-form CSR-1 with the ROC w.e.f. 01 April 2021. On filing of CSR -1, one ‘Unique CSR Registration Number’ shall be generated by the system automatically.

From 1st April 2021, it is mandatory for every implementing agency to  register itself with the ROC by filing the e-form CSR-1. If any implementing agency fails to file CSR-1, they shall not be eligible to continue as the Implementing agency.

 6.5 Utilization of Fund [Rule 4(5)] The Board of a company shall satisfy itself that the funds disbursed to the entities for CSR have been utilized for the purposes and in the manner as approved by it and the Chief Financial Officer or the person responsible for financial management shall certify to the effect.



If the Company fails to spend 2% of the Average net profit, then the following shall be the treatment of the unspent amount.


Directors Report:

The Company shall annex with its Board Report an annual report on CSR in format of Annexure-I (for f.y. 2020-21) or in Annexure II (w.e.f. fy 2021-22).

 In case of a Foreign Company:

The Balance sheet filed u/s 381 shall contain ‘an annual report on CSR in the format of Annexure I
(for f.y. 2020-21) or in Annexure-II (w.e.f. fy 2021-22).

Impact Assessment: It is a  new concept introduced through these rules.

A company having the obligation of spending the average CSR amount of Rs 10 Crore or more in the three immediately preceding financial years in pursuance of Section 135(5) of the Act, shall undertake impact assessment.

Impact assessment to be done by an independent agency. Impact assessment to be done in respect of CSR projects having outlays of one crore rupees or more, and which have been completed not less than one year before undertaking the impact study.

The impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR. Impact assessment expenditure for a financial year shall not exceed five percent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is less.

Website Disclosure: (Rule 9): The Board of Directors of the Company shall mandatorily disclose the followings on its website (if any):

  • Composition of CSR Committee
  • CSR Policy
  • Projects approved by the Board on their website.


  1. CSR Policy: CSR Policy to include:
  • Approach and direction given by the Board of the Company, taking into account the recommendations of its CSR Committee;
  • Guiding principles for the selection, implementation and monitoring of the activities as well as the formulation of the annual action plan
  1. Ongoing Project: “Ongoing  Project” means   a   multi-­‐year   project having timelines not exceeding three years excluding the financial year in which it was
  • Project that was initially not approved as a multi-­‐ year project can be made ongoing by extending the duration beyond one year by the board based on reasonable
  • It appears that CSR Project’s duration cannot be more than three
  1. Net Profit: Net profit as per its financial statement with the applicable provisions of the Act, but doesn’t include:
  • Any profit arising from any overseas branch or branches of the Company, whether operated as a separate company or otherwise; and
  • Any dividend received from other companies in India, which are covered under and complying with the provisions of Section 135 of the Act.
  1. Net Profit for foreign Company: Net profit means the net profit of such company as per profit and loss account prepared in terms of clause (a) of sub-section(1) of Section 381, read with section 198 of the Act.


The CSR activities can be undertaken by the Company itself or through the followings implementing agencies

  • A company established under Section 8 of the Act; or
  • A Registered Public Trust; or (amended as only registered public trust)
  • A Registered society

♦ Either singly or along with the other Company; or

♦ Above entity established by the Central Government or State Government; or

♦ Any of the above entity having a track record of at least 3 years in undertaking similar activities; or

♦ Any of the above entity established under an Act of parliament or a State Legislature.


  • Registration under Section 12A and 80G of the Income Tax Act, 1961 become mandatory.
  • Registration of such entity shall be mandatory by filing form CSR 1.


A Company may also collaborate with other companies for undertakingcthe projects or programs or CSR activities subject to the conditions.

Engage International Organization:

A company may engage the international organizations for designing, monitoring and evaluation of the CSR projects or programs as per its CSR policy as well as for the capacity building of their own personnel for CSR. Only the Central Government notified organizations shall qualify as International Organization.

CSR COMMITTEE: (Rule 5(2)- Committee shall formulate and recommend to the Board, an annual action plan in pursuance to its CSR Policy, which shall include the following:

  • The list of CSR projects or programmes that are approved to be undertaken in the area of Schedule VII
  • Manner of the execution of such projects
  • Modalities of utilization of funds and implementation of schedule for the projects
  • Monitoring and reporting mechanism for the projects or programmes; and
  • Details of need and impact assessment, if any, for the project undertaken by the Company.


  • The Board shall satisfy itself that the funds so disbursed have been utilized for the purpose and in the manner as approved by it.
  • The CFO or the person responsible for the financial management shall certify to the effect.
  • In case of an ongoing project, the board shall monitor the implementation of the project with reference to the approved timelines and year-wise allocation and shall be competent to make modification, if any required.

By CS Jayata Agarwal

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Ministry of Corporate Affairs (Government Of India ) Latest Updates

1. Mandatory use of Accounting Software having Audit Trail :

From FY commencing on 01.04.2021, every Company shall use Accounting Software having feature to record audit trail of each transaction, creating the edit log of changes made & ensuring that the audit trail cannot be disabled.


2. Other Matters to be Included in Auditors Report

a. Reporting regarding advances, loans & Investment other than disclosed in notes to accounts.
b. Receiving of funds for further lending or investing other than disclosed in notes to accounts.
c. Dividend declared or paid is in compliance of section 123 of CA, 2013.
d.Comment of use of Accounting Software having Audit Trail & other rules therein.


3. Amendments in Schedule III from 1st day of April, 2021 :

As per the amendments many new disclosures has been mandatory as detailed below:

a. Disclosure of Shareholding of Promoters.
b. Trade Payables ageing schedule with age 1 year, 1-2 year, 2-3 year & More than 3 years.
c. Reconciliation of the gross and net carrying amounts of each class of assets.
d. Trade Receivables ageing schedule with age 1 year, 1-2 year, 2-3 year & More than 3 years.
e. Detailed disclosure regarding title deeds of Immovable Property not held in name of the Company.
f. Disclosure regarding revaluation & CWIP ageing.
g. Loans or Advances granted to promoters, directors, KMPs and the related parties.
h. Details of Benami Property held.
i. Reconciliation and reasons of material discrepancies, in quarterly statements submitted to bank and         books of accounts.
j. Disclosure where a company is a declared wilful defaulter by any bank or financial Institution.
k. Relationship with Struck off Companies.
l. Pending registration of charges or satisfaction with Registrar of Companies.
m. Compliance with number of layers of companies.
n. Disclosure of 11 Ratios.
o. Compliance with approved Scheme(s) of Arrangements.
p. Utilisation of Borrowed funds and share premium.
q. Details of transaction not recorded in the books that has been surrendered or disclosed as income in the tax assessments.
r. Disclosure regarding Corporate Social Responsibility.
s. Details of Crypto Currency or Virtual Currency


CA Rajgopal Sanghi

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Disclaimer: This insight is meant for informational purpose only and should not be considered as an advice or opinion.

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Team SFS