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:

  • Section 192 – Salary
  • Section 192A – Payment of accumulated balance due to an employee
  • Section 194B – Winnings from lottery or crossword puzzle
  • Section 194BB – Winning from a horse race
  • Section 194LBC – Income in respect of investment in securitisation trust
  • Section 194N – Payments of certain amount/amounts in cash

206AB & 206CCA Compliance Check

Section 206AB & 206CCA Compliance Check Functionality procedure

Compliance Check functionality for Sections 206AB & 206CCA

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12 Comments

  1. Diethonguzo says:

    I am an indigenous Naga who received rent. Now being from the exempted category, all of a sudden I am being asked to furnish it return details. And being exempted category I have no such details. Now linking my pan to the above sections the company had informed me that the TDS deduction would be increased because I had not filed my it returns. I am exempted and I had submitted my exemption certificate too.

    What do I do?

    Thank you

  2. Dushyant Trivedi says:

    Condition 1 :- Incase a Authorized Motor vehicle dealer selling vehicle to retail customer for personal use. So is it compulsory to collect declaration form of 206AB/206CCA from customers?

    Condition 2 :- Incase a Authorized Motor vehicle dealer selling vehicle to another authorized Motor vehicle dealer for commercial purpose that is B2B & further he is selling vehicles to retail customers. So, in this case whether declaration is compulsory to collect from B2B customer ?

  3. Sanjeet Makharia says:

    Sir, When I. tax allows Excuse for Not filing tax return, in the case, Total income below taxable limit, after allDeductions Contrary, the New secs. 206CAB/ 206CCA ,would apply or not ?

  4. sameer vilas chougule says:

    I haven’t fill ITR for 18-19 and 20-21 financial years. i am salaried person. can I get exemption for 206AB under section 192. please do replay.

  5. sameer vilas chougule says:

    I haven’t fill ITR for 18-19 and 20-21 financial years. i am salaried person. can I get exemption for 206AB under section 192. please do replay.

  6. Shiv Kumar says:

    What about applicability of 206AB on Transporter who provide declaration of less than 10 vehicle hence TDS is not deductible, but he has not filed I T Return of last two year – than 206AB is apply or not ?

  7. Umesh Keer says:

    Higher TDS is collected on the basis of
    Total TDS during F.Y. Exceeding Rs. 50000/
    Without checking last two year filed or not.Who
    Is redressal authority.Before deducting higher
    TDS w.e.f.01.07.21 no intimation given to
    investors.

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