The Finance Bill 2021 has proposed new Section 206AB and Section 206CCA under Income Tax Act, 1961 which provides for the higher rate of TDS and TCS respectively for the deductee who do not file their Income Tax Returns for the both of the two assessment years relevant to the two previous years which are immediately before the previous year in which tax is required to be deducted or collected.
Section 206AA of the Income Tax Act, 1961 already provides for higher rate of TDS for non-furnishing of PAN as well as section 206CC of the Income Tax Act, 1961 provides for higher rate of TCS for non-furnishing of PAN.
The Government at the time of presentation of Budget 2021 has also proposed to insert new section 206AB and section 206CCA in the Income Tax Act, 1961 as a special provision providing for higher rate for TDS and TCS for the non-filers of income-tax return.
Proposed section 206AB of the Act would apply on any sum or income or amount paid or payable or credited, by a person (herein referred to as Deductor) to a specified person. The proposed TDS rate in this section is higher of the followings rates:-
- twice the rate specified in the relevant provision of the Act; or
- twice the rate or rates in force; or
- the rate of five per cent
However, this section shall not apply where the tax is required to be deducted under sections 192 (TDS on Salary), 192A (TDS on Premature withdrawal of EPF), 194B (TDS on winnings from lottery), 194BB (TDS on winnings from horse races), 194LBC (TDS by securitization trust) or 194N (TDS on cash withdrawal) of the Act.
If the provision of section 206AA of the Act is applicable to a specified person, in addition to the provision of this section, the tax shall be deducted at higher of the two rates provided in this section and in section 206AA of the Act.
Proposed section 206CCA of the Act would apply on any sum or amount received by a person (herein referred to as collectee) from a specified person. The proposed TCS rate in this section is higher of the following rates:-
- twice the rate specified in the relevant provision of the Act; or
- the rate of five percent
If the provision of section 206CC of the Act is applicable to a specified person, in addition to the provision of this section, the tax shall be collected at higher of the two rates provided in this section and in section 206CC of the Act.
The specified person is a person who has not filed the returns of income for both of the two assessment years relevant to the two previous years which are immediately before the previous year in which tax is required to be deducted or collected, as the case may be. Further the time limit for filing tax return under sub-section (1) of section 139 of the Act has expired for both these assessment years. There is another condition that aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in each of these two previous years. Specified person shall not include a non-resident who does not have a permanent establishment in India.
Consequential amendment is proposed in sub-section (4) of section 194-IB of the Act.
This amendment will take effect from 1st July, 2021.
Can you please explain the difference between “at twice the rate specified the relevent provision of act ” /”at twice the rate or rates in force” Section with examples.
Respected sir.,
1.WE are purchasing PAPER reams(MATERIAL ONLY) at the cost of Rs.5000/-per month from a GST registered suppliers which is used for magazine printing.
2.At the time of payment to supplier ,We are not deducting TDS since it involves Material only and not THE service.
3.In the above case of purchase ,206AB and 206CCA Declartion form to be received from above supplier or not.
Please reply
Thanks and Regards
K.Rengarajan
In case TDS is not applicable then no need to check the compliances of 206AB and 206CCA.
Sir.,
Thank you very much for your valuable reply
Thanks and regards
K.Rengarajan
New Section wef 1.7.21 , TDS would be deducted at Higher rate ,whether will it be a retrospective or from Current year from 1.7.21? If retrospective, than what about amount already deducted?
The said sections are applicable w.e.f. 01st July 2021 not retrospectively.
If Aadhar Not linked with PAN on or before 30.9.21 , TDS @20% to be deducted either from Retrospective effect from 1.4.21 Or from 1.10.21? Can you plz update?
Higher TDS in case of non-linkage of Aadhar with PAN will be applicable from the date of PAN gets inoperative due to non-linkage. As of now date of Aadhar linkage has been extended by the Government till 30th September 2021. It means this higher deduction will not apply in this case till 30th September 2021 in any case.
WEF 1.7.21 Proposed section 206AB of the Act ,Rate would be higher, If ITR not filled .Can you plz clarify , whether will it be a retrospective effect from FY 18-19 till today? and IF yes, than what about already Deducted ?
This section only effective from 01st July 2021. Forget whatever you have deducted in the past.
Check whether any deductee not filed returns of last two year, deduct the TDS at a higher rate from 01st July 2021.
If deductee already filed last two year returns, then deduct TDS from 01st July 2021 at normal rate.
WEF 1.7.21 Proposed section 206AB of the Act would apply on any sum or income or amount paid or payable or credited, by a person (herein referred to as deductor) to a specified person.”- TDS Tax Rate would be higher , Can you plz clarify , that it will be restrppective effect from FY 18-19 till today and IF yes, than what about already Deducted and decuctee calimed or not claimed?
You just need to check w.e.f. 01st July only, it is not applicable retrospectively.
We file ITR last 2 years but TDS & TCS was more than 50,000 this section applicable to me?
If you have already filed the ITR for previous 2 years then no need to see the second condition and TDS will be applicable on normal rates only.
Hi Anil,
I want to understand limit of Rs.50,000. Whether this limit pertains to TDS of current year? Or previous two financial year? How we will be able to know whether the total TDS amount of that party exceeded Rs.50k or not?
Hi Abhishek,
Rs 50,000 limit needs to be check for the previous two years not for the current year.
For checking this amount you may get the declaration from the deductee/collectee.
Very nice article by Mr. Anil Rawat.
It the Section 206AB applicable to payments made to non residents where TDS u/s 195 against Fees for technical services is applicable? Please clarify.
Thanks Surya.
This section specifically mentioned the excluded section from applicability and section 195 is not there.
So, as per my understanding, this section will also applicable on TDS deduction u/s 195.
Hi,
If person has not filed ITR of 2 Year than there is no relevance of second condition of aggregate of TDS and TCS shall be Rs. 50,000/-. and vice versa.
If 2 Year ITR filed than also there is no relevance of second condition.
CAN ANY ONE CLARIFY???
Higher TDS/TCS under these sections need to be deducted/collected in case of a person does not file the ITR for the last two years AND the TDS/TCS of those persons is more than Rs 50,000/- in the last two previous year.
In another way, if a person does not file ITR for the last two years and the TDS/TCS of his/her is less than Rs 50,000/- in the last two years, then no need to deduct/collect TDS/TCS under these sections.
I hope it is clear now.
Hi Anil
How the deductor will know that his vendor has not filled his Income Tax Return. Is government is providing any facility to the deductor to check the same.
What will be the consequences in case the highter TDS/TCS is not deducted by the deductor.
As of now there is no such facility provided by Government to deductor. We have only options to get declarations as well as ITR copies from our vendors to verify this compliance.
However Departments have easy access to check whether any persons file ITR or not. In case any of our vendor not filed returns and we have deducted TDS at normal rates then they can issue the demand at the time of issue of intimation or assessment.
Can you help me with the declaration format?
Hi Rajat, Sorry just see your reply. If still required please let me know and drop a e-mail.
“Proposed section 206AB of the Act would apply on any sum or income or amount paid or payable or credited, by a person (herein referred to as deductee) to a specified person.”- In above sentence, its should have been “Deductor” in the bracket? can you clarify
Yeah its “Deductor” instead of “Deductee”, sorry there is a typo error.
Thanks for correcting. Thanks a lot.
Thanks, please edit in main article; else readers may not get full context.