Finance Act, 2021 introduced two new sections 206AB and 206CCA in the Income Tax Act, 1961 (hereinafter referred to as “the Act”), which will be effective from 1 July 2021. The said sections instruct to deduct tax or collect tax at a higher rate in the case of non-filer of Income Tax Returns.
Applicability:
- Sec. 206AB shall be applicable where TDS is required to be deducted on any sum paid to a specified person under any provisions of the Act except u/s 192, 192A, 194B, 194BB, 194LBC, or 194N.
- Sec. 206CCA shall be applicable where TCS is required to be collected on any sum received from a specified person under any provisions of the Act.
-Specified person means a person who satisfies both the following conditions:
i. A person who has not filed his return of income for both of two assessment years immediately prior to the current financial year for which time limit u/s 139(1) has expired, and
ii.Aggregate amount of TDS/ TCS in his case is INR 50,000/- or more in each of these assessment years.
However, this definition of a specified person excludes a non-resident person not having a permanent establishment in India.
Rate of tax collection:
TDS/ TCS rate shall be higher of the following:
- Twice the prescribed rate in force, or
- 5%
Exclusions:
Sec. 206AB does not apply to the following TDS sections of the Act-
i. Sec. 192 – TDS on Salary Income
ii. Sec. 192A – TDS on premature withdrawal from the accumulated balance of Provident Fund
iii.Sec. 194B – TDS on winning from Lotteries
iv. Sec. 194BB – TDS on winning from horse race
v. Sec. 194LBC – TDS on income against investment in securitization trust
vi. Sec. 194N – TDS on payments of a certain amount in cash
Important Points:
- To facilitate Tax Deductors and Collectors in the identification of specified persons for compliance with sections 206AB and 206CCA, the Income Tax department has released a new functionality “Compliance Check for Section 206AB & 206CCA”.
- The said functionality is made available through (https://report.insight.gov.in) of the Income Tax department.
- TDS – Tax Deducted at source
TCS – Tax Collected at source
