Section 206AB and Section 206CCA of the Income Tax Act, 1961: Deduction of TDS/TCS for Non- Filers of Income Tax Return
The Hon’ble Finance Minister had proposed various amendments to the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ ) in her budget speech on 1st February, 2021, in order to rationalize various provisions of the Act, remove difficulties faced by the tax payers and provide tax incentives to taxpayers by bringing amendments to the Direct Tax Systems.
This article covers the provisions of section 206AB and section 206CCA of the Act in a lucid manner.
Section 206AA of the Act provides for higher rate of TDS for non-furnishing of PAN. Similarly, section 206CC of the Act provides for higher rate of TCS for non-furnishing of PAN. It can be seen by the Government that the above provisions had served the purpose of obtaining and furnishing of PAN by various person. Now there is a need to have similar provisions in order to ensure that return of income is filed by those person who have suffered a reasonable amount of TDS/TCS.
Hence, it was proposed to introduce section 206AB and section 206CCA for providing higher rate of TDS/TCS for the non-filers of Income Tax Returns. The provisions of the same are explained hereunder:
Section 206AB of the Act:
- The said section is applicable w.e.f. 01st July 2021.
- Any person who is responsible to pay any sum to a specified person shall deduct tax at source under the said section.
- Specified Person means:
> a person who has not filed the return of income for both of the two previous years immediately prior to the previous year in which the tax is required to be deducted and the time limit of filing the return of income for such previous year has expired under section 139(1) of the Act, and
> the aggregate of tax deducted at source and tax collected at source in his case is Rs. 50,000/- or more in each of these two previous years.
Specified Person shall not include a non-resident who does not have a permanent establishment in India.
- The rate at which TDS is deductible is higher of:
> twice the rate specified in the relevant provisions of the Act, or
> twice the rate or rates in force, or
> 5%.
- The above section will be applicable only on the payments where tax is required to be deducted under Chapter XVIIB, but not on the following sections:
> section 192 ~ Salary,
> section 192A ~ Payment of accumulated balance due to an employee,
> section 194B ~ Winning of lottery or crossword puzzle,
> section 194BB ~ Winnings from horse race,
> section 194LBC ~ Income in respect of investment in securitization trust,
> section 194N ~ Payments of certain amounts in cash
- If section 206AA and section 206AB both are applicable to a specified person, then tax shall be deducted at the higher of the two rates.
Section 206CCA of the Act:
- The said section is applicable w.e.f. 01st July 2021.
- Any person who is responsible to collect any sum from a specified person shall collect tax at source under the said section.
- Specified Person means:
> a person who has not filed the return of income for both of the two previous years immediately prior to the previous year in which the tax is required to be deducted and the time limit of filing the return of income for such previous year has expired under section 139(1) of the Act, and
> the aggregate of tax deducted at source and tax collected at source in his case is Rs. 50,000/- or more in each of these two previous years.
Specified Person shall not include a non-resident who does not have a permanent establishment in India.
Permanent Establishment includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.
- The rate at which TCS collectible is higher of:
> twice the rate specified in the relevant provisions of the Act, or
> 5%.
- The above section will be applicable only on the payments where tax is required to be collected under Chapter XVII-BB.
- If section 206CC and section 206CCA both are applicable to a specified person, then tax shall be collected at the higher of the two rates.
BARE ACT OF THE ABOVE SECTIONS ARE MENTIONED HEREUNDER FOR EASE OF REFERENCE
[Special provision for deduction of tax at source for non-filers of income-tax return.
206AB. (1) Notwithstanding anything contained in any other provisions of this Act, where tax is required to be deducted at source under the provisions of Chapter XVIIB, other than section 192, 192A, 194B, 194BB, 194LBC or 194N on any sum or income or amount paid, or payable or credited, by a person (hereafter referred to as deductee) to a specified person, the tax shall be deducted at the higher of the following rates, namely:—
(i) at twice the rate specified in the relevant provision of the Act; or
(ii) at twice the rate or rates in force; or
(iii) at the rate of five per cent.
(2) If the provisions of section 206AA is applicable to a specified person, in addition to the provision of this section, the tax shall be deducted at higher of the two rates provided in this section and in section 206AA.
(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 deducted, 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.]
[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 (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.]
DISCLAIMER
The content of this document is solely for information purposes. The view expressed in the said article by the author does not constitute any professional advice or formal recommendation. Due care has been taken by the author in preparing this document, the existence of mistakes and omissions herein is not ruled out. The author does not accept any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.
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