Section 206 AB and 206 CCA: Higher TDS /TCS for Not Filing of Income Tax Return

Section 206 AB and 206 CCA:


Higher TDS /TCS for Not Filing of Income Tax Return 


Finance Act, 2021 inserted two new sections 206AB and 206CCA in the Income-tax Act 1961 which takes effect from 1st day of July, 2021.The section mandates to deduct a higher rate of TDS of the payees who have defaulted in filing of Income Tax return for the last 2 preceding years. Similarly, Section 206CCA for TCS is inserted.

The main objective is to ensure that taxpayer do not fail to file their income tax return.

Section 206AB:

This section provides a tax deduction at source (TDS) at rates higher than those prescribed in the Act while making payments or collections to those who have not filed their income tax return.

Section 206CCA:

This section provides a collection of tax at source (TCS) on amounts received from the buyers at rates higher than specified in the Act.

Applicability:

This section is applicable where tax is required to be deducted at source for those transaction such as contract payments, professional charges, rent etc. excluding the following sections:

Section 192:TDS on salary.

Section 192A:TDS on Payment of Accumulated balance due to an employee.

Section 194B:TDS n Winnings from Lottery or crossword puzzle.

194BB:TDS on winning from a horse race.

194LBC:TDS on Income in respect of Investment in securitization trust.

194N:TDS on payment of certain amounts in cash.

 

From whom Tax is to be deducted or collected at higher rates:

The tax is to be deducted or collected at higher rates are those persons who satisfies the following criterion:

Ø The person who has not filed the income tax return for previous two financial years immediately the year on which tax is to be deducted.

Ø The time limit o file income tax return under section 139(1) is expired.

Ø The total TDS is more than INR 50,000 in the two previous financial years.

 

Note: It does not apply to a non-resident who does not have a permanent establishment in India.

 

Rate of TDS:

Tax is required to be deducted at higher of the following rates:

Ø Twice the rate specified in the relevant provision of the Income Tax Act;

Ø Twice the rate or rate in force;

Ø At the rate of 5%

 

Rate of TCS:

Tax is required to be collected at higher of the following rates:

Ø Twice the rate or rate in force;

Ø At the rate of 5%

 

 

Compliance Check by the deductor or collector:

This section has put extra burden on the deductor or collector of tax at source. To ease the burden the CBDT has issued a Compliance Check for Sections 206AB & 206CCA".

The tax deductor or collector can feed single PAN or multiple PAN to check whether the deductee/collectee has filed income tax return for the previous two financial year or not and can download the copy in PDF format.

 

 

 

 

Having rich experience in various profiles related to Taxation, Audit, Accounting, etc., within India and Abroad.

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