Applicability of Section 206AB & 206CCA Provision w.e.f. 01st July 2021

Finance Act, 2021 comes into force with Presidential assent on 28.03.2021 Two new sections have been introduced with effect from 01-Jul-2021 for non-filer of Income Tax Return. As per these sections (206AB & 206CCA), the rate of TDS/TCS shall be at the double of the normal rate or double the rate in force or at the rate of 5%, whichever is higher for all the payments to be made to the vendors who has not filed Income Tax Return for the immediately two previous years and total tax Deducted (TDS) and tax Collected (TCS) for each year was Rs. 50000 or more.

Therefore, we would request all our clients to collect confirmation along with ITR acknowledgement from all their vendors at the earliest.

For Example

If you are deducting TDS for FY 2021-22 for Quarter-1 then you must check Income Tax Return Filed of the vendor for any one of the two immediately preceding previous years, provided the time limit for filing Income Tax Return under section 139(1) is expired then the years to check are FY 2019-20 and FY 2020-21, but if the time limit for filing Income Tax Return under section 139(1) is not expired then the years to check are FY 2018-19 and FY 2019-20. If Income Tax Return Is not filed for both the years then the provisions for double rate of tax as mentioned above will be attracted.

Note

1. Also, kindly note the above-mentioned provisions are not applicable to Non-residents not having a PE (Permanent Establishment) in India.

2. If the time limit for filing Income Tax Return under section 139(1) is not expired for preceding 2 previous years then you cannot ask the vendor for a copy of Income Tax Return for that particular year whose time limit is not expired.

3. The above-mentioned provisions are not applicable to provisions of Section 192 which is TDS on Salary.

Also to track whether the vendors have filed Income Tax Returns for the preceding 2 previous years the same can be checked by creating a login on the Reporting Portal and importing bulk excel with the PAN No. of the vendors. At a time in bulk mode on reporting portal 10000 PAN can be checked simultaneously.