prpri Compliance of Section 206AB, Section 206CCA & Section 139AA Compliance of Section 206AB, Section 206CCA & Section 139AA

Section 206AB, Section 206CCA and Section 139AA of Income Tax Act and compliance thereof

In the already Compliance burdened Assessee, Government of India has introduced new section 206AB/206CCA and implemented Section 139 AA under Income-tax Act, 1961, (‘the Act’) w.e.f July 1, 2021. Under this section, TDS/TCS will be deducted/collected at higher rate to the specified person who did not file the income tax return (ITR) in the two previous financial years and whose aggregate TDS/TCS in each of the two previous financial years has exceeded Rs. 50,000 or for Proprietory Concerns/Individuals who have not linked the Aadhaar with PAN.

This will be applicable from July 1, 2021, onwards.

The new section 206AB/206CCA does not apply to a non-resident who does not have a permanent establishment in India. Permanent establishment for this purpose includes a fixed place of business where the enterprise’s business is carried out wholly or partially.

In addition to non-filing of income tax return and or if the specified person has not furnished PAN, then the TDS/TCS rate shall be higher of the rates prescribed in section 206AB/206CCA or section 206AA/206CC of the Act.

Determine whether a person can be defined as a “Specified Person ”

Conditions to be met : Is the  Condition met ? Remarks
A. i. IT Return is not filed for 2 preceding years before the previous year in which TDS /TCS has to be deducted or collected as the case may be.

And

ii. Aggregate TDS/TCS deducted or collected as may be applicable, exceeds Rs 50,000 in each of the previous year as the case may be.

 

 

YES

The tax shall be deducted at the higher of the following rates:

a) Twice the rate specified in the relevant provision of the Act;

b) Twice the rate or rates in force; or

c) 5%.

B. i. IT Return is not filed for 1 preceding years before the previous year in which TDS/TCShas to be deducted or collected as the case may be.

And

ii. Aggregate TDS/TCS deducted or collectedas may be applicable, exceeds Rs 50,000 in each of the previous year .

NO,

Only since one Condition is met, the provisions will not apply.

TDS/TCS rate shall be at the Normal   rates .
C. i. IT Return is not filed for 2 preceding years before the previous year in which TDS/TCS has to be deducted or collected as the case may be.

And

ii. Aggregate TDS /TCS deducted or collected as may be applicable ,does not exceedsRs 50,000 in each of the previous year

NO,

Only since one Condition is met, the provisions will not apply.

 

TDS/TCS rate shall be at the Normal   rates .
The new section 206AB/206CCA does not apply to a non-resident who does not have a permanent establishment in India.
Provisions of Section 139 AA
D. Non linking of Aadhar Card to PAN will render the cancellation of PAN The PAN is invalid and provisions of Section 206AA will be applicable TDS shall be deducted at the rate of twenty per cent.

The relevant Extract of provisions of the Section 206 AB, 206CCA and 139 AA are mentioned herein below :

Deduction of Tax at Higher Rate for non-filers of Return

The Finance Act, 2021 has inserted a new section 206AB for deduction of tax at higher rate if deductee failed to furnish return for specified period. This provision shall apply and the tax shall be deductible at the higher rates prescribed under this provision if the following conditions are satisfied:

a) Deductee has not filed the return of income for 2 assessment years relevant to the previous years immediately prior to the previous year in which tax is required to be deducted;

b) The due date to file such return of income, as prescribed under Section 139(1), has expired; and

c) The aggregate amount of tax deducted and collected at source is Rs. 50,000 or more in each of these 2 previous years.

The tax shall be deducted at the higher of the following rates:

a) Twice the rate specified in the relevant provision of the Act;

b) Twice the rate or rates in force; or

c) 5%.

Note 1: The provisions of section 206AB doesn’t apply to a non-resident who does not have a PE in India.

Note 2: If both the provisions of section 206AA and section 206AB are applicable, that is, deductee has neither furnished his PAN to the deductor nor has he furnished his return of income for the specified periods, the tax shall be deducted at the rates provided in section 206AA or section 206AB, whichever is higher.

Note 3: Tax is required to be deducted at higher rates under section 206AB in respect of every sum or income or amount from which tax is deductible under any provision of Chapter XVII-B except the sum or income or amount on which tax is deductible under any of the following provisions:

(a) Section 192: TDS on Salary;

(b) Section 192A: TDS on withdrawal from EPF;

(c) Section 194B: TDS on winning from lotteries, crossword puzzles, etc.

(d) Section 194BB: TDS on winning from racehorses;

(e) Section 194LBC: TDS on income in respect of investment in Securitization Trust;

(f) Section 194N: TDS on cash withdrawal.

New section 206CCA.

After section 206CC of the Income-tax Act, the following section shall be inserted with effect from the 1st day of July, 2021, namely:—

‘206CCA. Special provision for collection of tax at source for non-filers of income-tax return.—(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 (hereafter referred to as collectee) 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.

(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 filed the returns of income for both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be collected, for which the time limit of filing 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 each of these two previous years:

Provided that the specified person shall not include a non-resident who does not have a permanent establishment in India.

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.’.

New section 139AA.

56. After section 139A of the Income-tax Act, the following section shall be inserted, namely:—

‘139AA. Quoting of Aadhaar number.—(1) Every person who is eligible to obtain Aadhaar number shall, on or after the 1st day of July, 2017, quote Aadhaar number—

(i) in the application form for allotment of permanent account number;

(ii) in the return of income:

Provided that where the person does not possess the Aadhaar Number, the Enrolment ID of Aadhaar application form issued to him at the time of enrolment shall be quoted in the application for permanent account number or, as the case may be, in the return of income furnished by him.

(2) Every person who has been allotted permanent account number as on the 1st day of July, 2017, and who is eligible to obtain Aadhaar number, shall intimate his Aadhaar number to such authority in such form and manner as may be prescribed, on or before a date to be notified by the Central Government in the Official Gazette:

Provided that in case of failure to intimate the Aadhaar number, the permanent account number allotted to the person shall be deemed to be invalid and the other provisions of this Act shall apply, as if the person had not applied for allotment of permanent account number.

(3) The provisions of this section shall not apply to such person or class or classes of persons or any State or part of any State, as may be notified by the Central Government in this behalf, in the Official Gazette.

Explanation.—For the purposes of this section, the expressions—

(i) “Aadhaar number”, “Enrolment” and “resident” shall have the same meanings respectively assigned to them in clauses (a), (m) and (v) of section 2 of the Aadhaar (Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act, 2016 (18 of 2016);

(ii) “Enrolment ID” means a 28 digit Enrolment Identification Number issued to a resident at the time of enrolment.’.

ANNXEXURE 1

Undertaking pursuant to Section 206AB, 206CCA AND Section 139AA of the Income Tax Act, 1961

To,

The Director,

_____________

_____________

______________

Dear Sir,

Re : Declaration for compliance of provisions of Section 206AB, 206CCA and 139AAof Income Tax Act, 1961.

Ref :PAN No. ________________ TAN _______________

With reference to above, we have to state that the provisions of Section 206AB and 206CCA of the Income Tax Act are not applicable to us in regards to the Financial transactions with your Company.

Details of our returns are as follows:

S. No. Financial Year PAN Number Acknowledgement Number Date of Filing  return of income
1 2018-19 <<Please insert PAN number>>

 

<<Please insert>> <<Please insert>>
2 2019-20 <<Please insert>> <<Please insert>>
3 2020-21 <<Please insert>> <<Please insert>>

Further, since we are not a Proprietory Concern or an Individual, provisions of Section 139AA are not applicable to us.

Or.

We have met the requirements of section 139AA of the Income Tax Act, 1961.  The linking of PAN-Aadhar has been done within the due date as specified in the Income Tax Act, 1961 and you are requested not to deduct higher rate of TDS.

In case of a non compliance of provisions of Section 206AB, 206CCA and 139AA of the Act  and resultant levy of any Tax or Penalty on the Company by the Taxation Authorities , we undertake to pay directly to the Tax authorities or re-imburse to the Company the additional TDS/ TCS, interest and penalty demand by whatever name called raised by the tax authorities along with any associated costs incurred by the Company.

The Company has duely authorised the Signatory, by a board resolution/power of attorney on behalf of the company/ partnership firm/ proprietorship firm/AOP to sign this declaration.

For ________________                (Name of Entity)

Signature: ___________________

Name of authorised person: _________________

Designation: __________________

PAN Number_________________________

TAN  _________________

Place: __________________Date: _________________

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Company: Ajay B Garg
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