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In a significant development, the Central Board of Direct Taxes (CBDT) has issued Notification No. 46/2024-Income Tax  Dated: 27th May, 2024 exempting the Reserve Bank of India (RBI) from the provisions of Section 206CCA of the Income Tax Act, 1961. Also Read: CBDT exempt RBI from Higher TDS deduction under Section 206AB

Understanding Section 206CCA

Section 206CCA, introduced as a special provision for the collection of tax at source, targets non-filers of income tax returns. The section mandates that tax should be collected at a higher rate from specified persons who have not furnished their income tax returns for the relevant assessment year. Here are the key points of the section:

CBDT exempts RBI from Section 206CCA provisions (TCS Collection at higher rate)

  1. Higher Rate of Tax Collection: The tax is to be collected at either twice the rate specified in the relevant provision of the Act or at the rate of 5%, whichever is higher. However, the rate of tax collection should not exceed 20%.
  2. Concurrent Applicability: If Section 206CC (which deals with higher TCS rates for non-provision of PAN) is also applicable, the tax will be collected at the higher of the rates provided in Section 206CCA and Section 206CC.
  3. Definition of Specified Person: A specified person under this section is someone who has not filed their income tax return for the previous year and for whom the aggregate of tax deducted and collected at source exceeds ₹50,000.
  4. Exclusions: The section excludes non-residents without a permanent establishment in India and individuals not required to file income tax returns for the relevant assessment year, as notified by the Central Government.

The Notification Exempting the RBI

On May 27, 2024, the Ministry of Finance issued Notification No. 46/2024, exempting the Reserve Bank of India from the ambit of Section 206CCA.

Text of Section 206CCA

Special provision for collection of tax at source for non-filers of income-tax return

206CCA. (1) Notwithstanding anything contained in any other provisions of this Act, where tax is required to be collected at source under the provisions of Chapter XVII-BB, on any sum or amount received by a person from a specified person, the tax shall be collected at the higher of the following two rates, namely:—

(i) at twice the rate specified in the relevant provision of the Act; or

(ii) at the rate of five per cent:

Provided that the rate of tax collection at source under this section shall not exceed twenty per cent.

(2) If the provisions of section 206CC is applicable to a specified person, in addition to the provisions of this section, the tax shall be collected at higher of the two rates provided in this section and in section 206CC.

(3) For the purposes of this section “specified person” means a person who has not furnished the return of income for the assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be collected, for which the time limit for furnishing the return of income under sub-section (1) of section 139 has expired and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in the said previous year:

Provided that the specified person shall not include—

(i) a non-resident who does not have a permanent establishment in India; or

(ii) a person who is not required to furnish the return of income for the assessment year relevant to the said previous year and is notified by the Central Government in the Official Gazette in this behalf.

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.

*****

MINISTRY OF FINANCE
(Department Of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
New Delhi

Notification No. 46/2024-Income Tax | Dated: 27th May, 2024

S.O. 2106(E).—In exercise of the powers conferred by clause (ii) of the proviso to sub-section (3) of section 206CCA of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies the Reserve Bank of India to be a person referred to in the said clause.

2. This notification shall come into force from the date of its publication in the Official Gazette.

[No. 46/2024 F. No 370142/8/2024-TPL]
KHUSHBOO LATHER, Under Secy.

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