prpri Facilitating platform to comply with higher rates of TDS & TCS under 206AB & 206CCA of ITA Facilitating platform to comply with higher rates of TDS & TCS under 206AB & 206CCA of ITA

Facilitating platform to comply with higher rates of TDS & TCS under 206AB and 206CCA

Finance Act 2021 introduced two new section 206AB and 206CCA of Income tax Act 1961 ’the Act’ with effect from 1 July 2021. The object being to increase the timely filing of income tax returns by resident assesses or non-resident assesses having a permanent establishment.

According to the above sections, any person from whose income / payment tax is required to be deducted (other than under 192, 192A, 194B, 194BB & 194N) or collected at source as per provisions of above Act has to be provide information to the person responsible for deduction / collection of tax at source to the effect that if amount of TDS  or TCS in his case has been of Rs. 50,000/- or more in two previous years, whether returns of income under sub-section (1) of section 139 for relevant assessment years has been filed by the assesses.

In case the above conditions are not met or information is not provided such assesses would fall under the category of “specified person” and tax is required to be deducted / collected at the rate higher of twice the rates specified in the tax law or 5%.

Information available in the income tax return are confidential privileged information which assesses cannot share every person from whom payment is due. Accordingly, assesses had to scramble to came up with various declaration formats confirming that they do not fall under the category of specified person under the Act.

To ease this compliance burden of assesses, Central Board of Direct Taxes ‘CBDT’ vide its circular No. 11 dated 21 June 2021 has introduced a new functionality “Compliance Check for 206AB & 206CCA” on the income tax reporting portal ITDREIN from within the income tax e portal of income tax under pending action.

The tax department would make available a list of specified persons i.e. assesses on account of not meeting the conditions mentioned in 206AB & 206CCA of the Act to obtain relief from higher tax deduction rates.

Entities required to make payments can punch in the Permanent Account Number ‘PAN’ of the relevant person\entity to whom payment is to be made. If the name appears, then higher tax deduction\collection rate ’TDS\TCS’ shall apply and if it does not appear, TDS\TCS’ shall apply at rates applicable.

CBDT proposes to provide facility bulk checking of payee’s\collectee’s PAN which assesse’s can verify before proceeding to withhold and make payment. Once a payee’s name does not appear, it shall not appear in the Specified Person list for the complete financial year. However, if it does appear, payer\collector will have to check the list every time any payment is made, to verify that such specified person name has been dropped from the list on account of having filed the return of income.

The compliance check facility is a welcome relief to assesses, who would otherwise be mandated to obtain declaration from all applicable payees.

Latha Sherlekar- Article is created\published in personal capacity.

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July 2021