Sa-Dhan Newsletter Volume 5 Issue 2

Operational Costs of Delivering Microfinance : Banker's Perspectives

Budget Features Relevant

For Non-Profit Organisations

1.

Cancellation of registration of trust and

the aggregate during a Financial Year. This

amendment shall be effective from 1st October, 2004.

withdrawal of approval

The existing provision of deducting the tax from the

The Finance Bill proposes to amend Section 12AA

amount credited or paid to a contractor or sub-

giving power to the Commissioner of Income Tax

contractor in case of the amount of individual

(CIT) under sub section (3) of section 12AA to cancel

contract exceeds Rs.20,000 shall remain as it is.

the registration granted under subsection (1) of

Section 12AA if the CIT is satisfied that the activities

2.

TDS returns in hard format (in papers) can

of any trust or institution are not genuine or are not

now be filed with any authority or any agency

being carried out in accordance with the objects of

the trust or institution after giving a reasonable

opportunity of being heard.

The Finance Bill proposes that the paper TDS return

required to be filed under Section 206(1) can now

As per the existing provisions of Section 253(1)(c),

be filed with any authority or agency specified by

the order passed by the Commissioner under Section

rules made by the Central Board of Direct Taxes. This

12AA is an appealable order. Therefore, this order

amendment has been made to implement the scheme

passed by the CIT cancelling the registration shall be

of filing TDS return with National Securities Depository

appealable to the ITAT under section 253(1)(c) though

Limited or Unit Trust of India instead with the

not specifically mentioned in the Bill.

Assessing Officer so that the data of the paper return

can be digitalized. This amendment shall be effective

Similarly, the National Committee which grants

from 1st October, 2004.

approval under Section 35AC for carrying out eligible

3.

No requirement to issue TDS certificates.

project or scheme is being empowered to withdraw

the approval where the association or institution fails

to furnish to the national committee, after the end

The Finance Bill proposes to make a far reaching

of each financial year, a report in such form and

change in the procedure for the issue of TDS

stating further such particulars and within such time

certificates. Provisions of Section 200 and 203 are

as may be prescribed after giving a reasonable

proposed to be amended to provide the following:

opportunity of being heard. This order of the

withdrawal of the approval by the national committee

1.

There shall be no requirement for the issue of

is not an appealable order.

TDS certificate by the deductor on or after 1st

April 2005.

Both the amendments shall be effective from 1st

October, 2004.

2.

Prescribed authority to issue annual statement

to deductee

Tax Deducted At Source (TDS)

Instead, the prescribed income tax authority

shall issue a yearly statement to the person

1.

Scope of tax deduction on payment to

from whose income the tax has been deducted

contractors widened

specifying the amount of tax deducted or paid

or such other particulars as may be prescribed

Deduction of tax at source from payments to contractor

as per the above scheme. This will be an

and sub-contrcator is governed by section 194C of

intimation to the deductee of the amount

the Income Tax Act. As per the existing provisions

deducted and paid by various deductors on his

no tax is required to be deducted at source from any

behalf .

sum credited or paid in pursuance of any contract,

the consideration for which does not exceed

3.

Deductor to submit quarterly statement

Rs.20,000/- i.e. if the consideration for an individual

contract does not exceeds Rs.20,000, no tax is

However, an additional obligation is being put

required to be deducted.

on the deductor to prepare and submit quarterly

statement, in respect of the tax deducted and

To prevent the practice of splitting the contract to

paid, to the prescribed income tax authority or

less than Rs.20,000, the Finance Bill 2004 proposes

person authorized by such authority, setting

to amend Section 194C(3) to provide that tax shall

forth such particulars and within such time as

also be required to be deducted in respect of a

may be prescribed. Failure to file such statement

contract where the amount credited or paid to a

within the time shall be liable to penalty under

contractor or sub-contractor exceeds Rs.50,000 in

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