Explanations and FAQ’s on Sec 206AB and Sec 206CCA
Section 206AB: Special provision for deduction of tax at source for non-filers of income-tax return and Section 206CCA: Special provision for collection of tax at source for non-filers of income-tax return
1. Who is a Specified person?
Specified persons means a person
i. 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 or collected.
(And)
ii. 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.
Note: For FY 2021-22 the above point (i) two assessment years relevant to the two previous years is FY 2018-19 and FY 2019-20 has to be considered.
2. Not applicable in which cases?
The provisions of Sec 206AB/ 206CCA not applicable in the following Cases:
i. If the Tax deducted Under Sections 192, 192A, 194B, 194BB, 194LBC or 194N
ii. The specified person shall not include a non-resident who does not have a permanent establishment in India.
3. Is the Provisions of Sec 206AB and 206CCA Applicable in all cases?
No, Not Applicable in all the cases.
The provisions of Sec 206AB and 206CCA applicable in cases where Tax is required to be deducted or collected under the provisions of Chapter XVII B other than section 192, 192A, 194B, 194BB, 194LBC or 194N.
Illustration: X Ltd paid rent to Mr. Y rs.1,50,000 per annum, whether X Ltd liable to deduct tax U/s 206AB?
In the present case X Ltd paid rent to Mr. Y Rs. 150000 which covered under section 194I but X Ltd not liable to deduct the TDS U/s 194I since the threshold limit is 2,40,000
So the provisions so Section 206AB is not applicable in the present case. It is applicable only case where Tax is required to be deducted at source or collected at source.
i.e in the above case if the rent paid is Rs. 3,60,000 then the provision of section 194I applicable – TDS required to be deducted U/s 194I and Simultaneously Provisions of Section 206AB also applicable.
4. Rate of tax U/s 206AB and 206CCA?
The rate of tax U/s 206AB: 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.
The rate of Tax U/s 206CCA: 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.
5. Sec 206AB and Sec 206CCA Applicable from?
The provisions of Sec 206AB and Sec 206CCA applicable from 01-07-2021.
Source: Circular No. 11/2021-Income Tax, dated: 21/06/2021
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Disclaimer: The above view has been given on the basis of our understanding of the relevant Statutes. It has been given after a careful study of the issues. Our view is not binding on the statutory authorities and they may take a contrary view. One has to exercise their best judgement in interpretation of the law.
CA Koti Reddy Boosipally | R C V & Co., | Chartered Accountants
Author Bio
In the above article the writer has not considered the 3rd condition that AGGREGATE OF THE TDS & TCS only is Rs. 50,000 or more for each p.y. but in the given illustration TDS u/s 194I is Rs. 36,000/- p.a. hence its <50,000/- and 206AB is not applicable thought 194I applies,
could you please correct me??
The TDS U/s 206AB is in addition to TDS U/s 206AA (Sec 206AA is higher rate of TDS @ 20% in case of PAN not available). TDS US 206AB and TDS US 206AA both are seperate.
TDS US 206AB applicable only cases where TDS required to be deducted. i.e if the value is below the threshold limit, then no TDS applicable US 206AB
If u/s 194I where rent paid is above threshold limit and PAN not submitted it (194I) already takes care of this by deducting tax @20%. Then why new section 206AB is required?
With the reference of quote “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 SECTIONS 192, 192A, 194B, 194BB, 194LBC OR 194N ON ANY SUM OR INCOME OR AMOUNT PAID OR PAYABLE OR CREDITED TO A SPECIFIED PERSON, THE TAX SHAL BE DEDUCTED AT HIGHER RATE”.
It indicates that even if amount paid is below threshold limit and payee is non filer, provisions of section 206AB are applied. This is why 206AB is brought in.
Dear Maneesha,
Sec 206AB is applicable 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.
i.e. in case of tax required to be deducted under section 192, 192A, 194B, 194BB, 194LBC or 194N – TDS U/s 206AB not applicable
if the TDS is required to be deducted in other TDS sections (ex: Sec 194C, 194I, 194J, 194H etc) – TDS U/s 206AB is applicable provided remaining conditions need to be satisfied
Tq sir… For clarification
Under not applicability of this section you hav mentioned if the tds is deducted u/s 192,192A,194B,194BB,194LBC and 194N this section , so if tds not deducted then this sec applicable right ? ;But under point 3 mentioned ” The provisions of Sec 206AB and 206CCA applicable in cases where Tax is required to be deducted or collected under the provisions of Chapter XVII B other than section 192, 192A, 194B, 194BB, 194LBC or 194N”. Sir..Kindly clarify when it is applicable ? TIA.