Not filed income tax returns- Get ready for higher rate of TDS/TCS deduction

The Finance bill 2021, propose to inserts two new section i.e. Sec. 206AB and Sec. 206CCA to enable for deduction and collection of TDS and TCS at higher rates  for those who have not filed their income tax returns. Brief about these sections is as  below-

Applicability of the Section 206AB: This section is applicable with effect from 1st July 2021

To whom it’s applicable:  This section is applicable to the persons who are covered under the below two criteria

a. Those are required to file the Income tax return u/s.139(1) of Income tax act, but not filed the income tax returns for two assessment years prior to the previous year in which tax is required to be deducted. Example in case TDS need to be deducted in previous year 2021-22 then the relevant income tax returns for the Previous years are  2019-20 & 2020-21   & Assessment years are 2020-21 & 2021-22 and

b. Aggregate tax deducted at source for those two previous years Rs. 50, 000/- or more in each of the previous years

This section will not apply to non-resident who does not have permanent establishment in India

TDS rates:  The TDS rate applicable under this section higher of the below

a. Twice the rate specified in the relevant TDS sections

b. 5 %

In case the person covered under this section also covered the deduction or collection of tax at the higher rate u/s.206AA i.e. PAN not furnished or PAN not available cases, then the rate of tax deduction is higher of sec.206AA and Sec.206AB

However this new provision does not apply to Sec.192, 192A, 194B, 194BB, 194LBC or 194N

Applicability of the Section.206CCA: This section is applicable with effect from 1st July 2021

To whom it’s applicable:  This section is applicable to the persons who are covered under the below two criteria

a. Those are required to file the Income tax return u/s.139(1) of Income tax act, but not filed the income tax returns for two assessment years prior to the previous year in which tax is required to be collected. Example in case TCS need to be collected in previous year 2021-22 then the relevant income tax returns for the Previous  years are  2019-20 & 2020-21   & Assessment years are 2020-21 & 2021-22 and

b. Aggregate tax collected at source at sources for those two previous years is Rs. 50, 000/- or more in each of the previous years

 This section will not apply to non-resident who does not have permanent establishment in India

TCS rates:  The TCS rate applicable under this section higher of the below

a. Twice the rate specified in the relevant TCS sections

b. 5 %

In case the person covered under this section also covered the deduction or collection of tax at the higher rate u/s.206CC i.e. PAN not furnished or PAN not available cases, then the rate of tax deduction is higher of sec.206CC and Sec.206CCA

The object of the above two amendments is to make the Taxpayer file their income tax returns without fail.  To identify the deductee`s return filling status, the deductor may have to collect the return filed acknowledgement or declaration from the deductee.