Section 206AB/206CCA: TDS/TCS for Non-Filer of Income Tax

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In an attempt to ensure filing of Income tax returns by eligible citizen, Income tax department introduced section 206AB with effect from 1st July 2021. The two section will require higher rate of TDS/TCS on payment made/received to/from non-filer of Income tax return.

Section 206AB in detail

Effective 1st July, 2021 If any payment is made to a SPECIFIED PERSON, on which tax is deductible then TDS shall be deducted at higher of following rates:

2 times the rate specified in the relevant provision of the Act; or
at twice the rate or rates in force;
5%

SPECIFIED PERSON

"Specified person" means a person:

Who has not filed the returns of income for 2 immediately preceding FY, for which the time limit of filing return of income u/s 139 has expired; AND
Whose Aggregate amount of TDS/TCS is 50,000 or more in each of the two previous years:

TDS sections not covered under this section: If TDS is deductible under below section, then section 206AB is not applicable.

192 TDS on Salaries

192A TDS on Premature withdrawal of EPF

194B TDS on Winning from Lottery

194BB Winning from Horse Race

194LBC Income in respect of investment in securitization trust

194N TDS on Cash Withdrawal

206AA - Requirement to furnish Permanent Account Number.

Any person receiving any sum or income (Deductee), on which tax is deductible, shall furnish his Permanent Account Number to the Deductor. If PAN is not furnished than TDS shall be deducted at higher of the following rates:

Rate specified in the relevant provision of this Act; or
Rate or rates in force;
20% (5% for section 194O and 194Q)

194O – E-COMMERCE Operator TO ECOMMERCE PARTICPANTS

194Q – TDS on Purchase of Goods

If section 206AA is also applicable to a Specified person, TDS shall be deducted at higher of following:

Rate as per section 206AB
Rate as per section 206AA.

Note: Specified person shall not include a Non-resident who does not have a permanent establishment in India.

Explanation.—For the purposes of this sub-section, the expression "permanent establishment" includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.

Illustration

Mr. A is Contractor. The Income tax return and TDS/TCS status of Mr. A are as follows:-

Years 2017-18 2018-19 2019-20 2020-21 2021-22

Return Filed Not-Filed Not-Filed Not-Filed Not Filed

TDS/TCS 40,000 55,000 65,000 30,000 20,000

Assume return filing Due Date 30th September.

On 1st July, 2021, a payment of 50,000 is to be paid to Mr. A.

Compute TDS?????

Solution

We need to check whether Mr. A is a SPECIFIED PERSON?????

1st Criteria: Let see the return filing in 2 Preceding Year

2020-21: We cannot consider because due date not expired.

We will consider below two years:

2019-20: Return not filed

2018-19: Return not filed

2nd Criteria: Let see the aggregate TDS/TCS of the above two years

2019-20: > 50,000

2018-19: > 50,000

Hence, Mr. A is a Specified Person

TDS shall deducted be higher of Following:

Rate prescribed u/s 194C(payment to contractor) - 1% or
5%

TDS as per 206AB= 50,000*5% = INR 2,500

If Mr. A Does not Provide PAN, then TDS shall be deducted at higher of following:-

Rate as per section 206AB – 5%
Rate as per section 206AA. – Assume 20%

TDS = 50,000*20% = INR 10,000

SECTION 206CCA in Details

Effective 1st July, 2021 If any payment is received from a SPECIFIED PERSON, on which tax is collectible, then TCS shall be collected at higher of following rates:

2 times the rate specified in the relevant provision of the Act; or
5%

SPECIFIED PERSON

"Specified person" means a person:

Who has not filed the returns of income for 2 immediately preceding FY, for which the time limit of filing return of income u/s 139 has expired; AND
Whose Aggregate amount of TDS/TCS is 50,000 or more in each of the two previous years:

206CC - Requirement to furnish Permanent Account Number.

Any person paying any sum (Collectee), on which tax is collectible shall furnish his Permanent Account Number to the Collector. If PAN is not furnished than TCS shall be collected at higher of the following rates:

Rate specified in the relevant provision of this Act; or
5% (1% for section 206C(1H)

If section 206CC is also applicable to a Specified person, TCS shall be collected at higher of following:

Rate as per section 206CCA
Rate as per section 206CC.

Note: Specified person shall not include a Non-resident who does not have a permanent establishment in India.