Applicability and Analysis Section 206AB and 206CCA of Income Tax Act, 1961
Introduction: Section 206AB and 206CCA are newly inserted sections in the Income Tax Act,1961 vide Finance Act, 2021. These sections are special provision for deduction/collection of tax at source at a higher rate for certain non-filers (specified person) of Income Tax Return.
Section 206AB deals with deduction of tax (TDS) at a higher rate whereas Section 206CCA deals with the collection of tax (TCS) at a higher rate. Since both the sections are similar in nature, efforts have been made to discuss both the section in tandem.
Effective Date: Section 206AB and 206CCA are effective from 1st July 2021.
Section 206AB and Section 206CCA are non-obstante sections having an overriding effect on any other provision/section contrary to this under the Income Tax Act.
Sub-section (1) of Section 206AB/206CCA states that, where tax is required to be deducted/collected at source on any sum or income or amount paid/received or payable or credited by any person to/from the specified person, then Tax shall be deducted/collected at higher of the following rates:
|For Section 206AB||For Section 206CCA|
|(i) At twice the rates specified in the relevant provisions of the act||(i) At twice the rates specified in the relevant provisions of the act|
|(ii) At twice the rate or rates in force||(ii) At the rate of 5%|
|(iii) At the rate of 5%|
Further, Sub-section (2) of Section 206AB/206CCA provides that on Non-furnishing of PAN by the specified person, Section 206AA/206CC shall be applicable in addition to this section respectively and the tax shall be deducted/collected at higher of two rates provided in Section 206AB/206CCA and in Section 206AA/206CC.
Who are ‘Specified Person’/ Conditions for Applicability of Section 206AB/206CCA
Section 206AB/206CCA are applicable to Specified person.
Condition 1 – Person has not filed their Income Tax Return for two previous years immediately preceding the previous year in which tax is required to be deducted/collected
Condition 2 – The time limit for filing such return of income U/s 139(1) has expired.
Condition 3 – Aggregate of Tax deducted/collected at source in each of these two financial years is INR 50,000/- or more
Therefore, For FY 2021-22 effective 1st July 2021, specified person shall mean those persons who have not filed their Income Tax Return for both the FY 2018-19 & FY 2019-20 and whose total tax deducted/collected during each of FY 2018-19 & FY 2019-20 were INR 50,000/- or more.
Non-Applicability/Exemptions under Section 206AB/206CCA
Both Section 206AB/206CCA are not applicable to a non-resident who does not have a permanent establishment in India.
Further, provisions of section 206AB do not apply to any sum or income or amount paid or payable or credited on which tax is otherwise deducted at source under below-mentioned provision of Chapter XVIIB:
206AB & 206CCA Compliance Check