New IT Act 2025 — Knowledge Bank

Power of Central Government to relax provisions of this Chapter

Section 400 — Power of Central Government to relax provisions of this Chapter

Old Act equivalent: Sections 197A, 195(2), 195(3), 197(1) of IT Act 1961 Sub-part: B.—Deduction and collection at source

Statutory Text

  1. (1) The Central Government may, by notification provide that deduction or collection of tax shall not be made or is to be made at such lower rate, from such payment or receipt and in respect of such person or class of persons.

(2) The Board may, with the previous approval of the Central Government, issue guidelines to remove any difficulty arising in giving effect to the provisions of this Chapter and such guidelines shall be—

(a) binding on the income-tax authorities and on the person liable to deduct or, as the case may be, collect income-tax; and

(b) laid before each House of Parliament.

(3) The Board may notify, a class of person, or cases, where the person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, to make an application in such form and manner as may be prescribed, to the Assessing Officer, to determine the appropriate proportion of sum chargeable in the manner as may be prescribed, and accordingly tax shall be deducted under section 393(2) (Table: Sl. No. 17) on that proportion of the sum which is so chargeable.

(4) The Board may by notification, make rules specifying the cases in which, and the circumstances under which, an application may be made for grant of a certificate under section 395(1) and (3), and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith.

Sub-sections

Sub-section (1)

Power of Central Government to notify nil deduction/collection or lower rate of deduction/collection for specified payments, receipts, persons, or classes of persons.

Sub-section (2)

Power of the Board (with Central Government approval) to issue binding guidelines to remove difficulties in this Chapter. Guidelines are binding on income-tax authorities and deductors/collectors, and must be laid before Parliament.

Sub-section (3)

Power of Board to notify classes of persons/cases where the payer to a non-resident (not being a company) or foreign company may apply to the AO to determine the chargeable proportion of sum, and TDS under section 393(2) Table Sl. No. 17 applies only on that proportion.

Sub-section (4)

Power of Board to make rules specifying cases and circumstances for applications for certificates under section 395(1) and (3) (lower/nil deduction certificates).

Provisos

None.

Explanations

None.

Tables

None.

Key Structure

  • Applies to: All TDS/TCS provisions under this Chapter; non-resident payments (sub-section 3); certificate applications (sub-section 4).
  • Conditions: Central Government notification (sub-section 1); Board guidelines with CG approval (sub-section 2); Board notification for specified classes (sub-sections 3 and 4).
  • Exceptions: Guidelines under sub-section (2) are binding on both authorities and deductors/collectors; must be laid before Parliament.

Cross-References

  • s393(2) Table Sl. No. 17 — TDS on payments to non-residents, applied on chargeable proportion as determined under sub-section (3).
  • s395(1) and (3) — certificates for lower or nil deduction, rules framed under sub-section (4).

Amendment Notes

None noted from the extracted pages.

Practical Notes

  • This section consolidates multiple relaxation and exemption powers previously scattered across sections 197A (no deduction in certain cases), 195(2) and 195(3) (application to AO for non-resident payments), and 197(1) (certificate for lower deduction).
  • Sub-section (1) is the source for notifications exempting certain payments from TDS/TCS (e.g., no TDS on interest on savings bank accounts below threshold, no TCS on certain transactions).
  • Sub-section (2) guidelines are a powerful tool — they are binding on authorities and deductors alike, unlike circulars which bind only the department.
  • Sub-section (3) addresses the practical difficulty of determining the taxable portion of payments to non-residents where the entire sum may not be chargeable (e.g., reimbursements, composite contracts with service and material components).
  • Sub-section (4) governs the procedural framework for lower/nil TDS certificate applications under section 395.
  • Circular 11/2019
  • Circular 5-P(LXX-6)/1968
  • Circular 7/2014

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