No Tax to be deducted under Section 194A of Income Tax Act,1961 on Scheduled Tribes: CBDT

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According to a recent notification by Central Board Of Direct Taxes (CBDT) vide Notification No. 110/2021/F. No. 275/27/2021-IT(B) dated 17.09.2021, no tax shall be deducted under section 194A of the Income Tax Act,1961 on payment made by a Scheduled Bank located in a Specified Area to a member of Scheduled Tribe as referred to in section 10 (26) of the Income Tax Act,1961 subject to following conditions:

(i) the payer satisfies itself that the receiver is a member of Scheduled Tribe residing in any specified area, and the payment as referred above is accruing or arising to the receiver as referred to in clause (26) of section 10 of the said Act, during the previous year relevant for the assessment year in which the payment is made, by obtaining necessary documentary evidences in support of the same;

(ii) the payer reports the above payment in the statements of deduction of tax as referred to in sub-section (3) of section 200 of the said Act; 

(iii) the payment made or aggregate of payments made during the previous year does not exceed twenty lakh rupees.

Section 10(26) has list down following areas as ‘Specified Area’:

(a) Any area specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution;

(b) The States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura;

(c) The areas covered by notification no. TAD/R/35/50/109, dated the 23-02-1951, issued by the Governor of Assam under the proviso to paragraph 20(3) as it stood immediately before the commencement of the North-Eastern Areas (Reorganisation) Act, 1971; or

(d) The Ladakh region of the State of Jammu and Kashmir.

2. ‘Scheduled bank’ shall have the same meaning as assigned to it in clause (e) of section 2 of the Reserve Bank of India Act, 1934.

Section 194A

Interest other than “Interest on securities”

194A. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force :

Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed [one crore rupees in case of business or fifty lakh rupees in case of profession] during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section.]

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