This write uptakes note of changes proposed with regard to some of the TDS /TCS provisions applicable from 1st July, 2021. In the Union Budget 2021 there has been made a proposal to charge higher TDS and TCS on non-filers of income tax return (ITR). This is done to put off the practice of not filing returns by taxpayers in whose case considerable sum of tax has been deducted or collected.

As per the proposal, if any individual in whose case TDS or TCS of Rs. 50000 or more has been deducted or collected in the last two years and if such a person has not filed ITR, then the TDS/TCS rate will be double of the specified rate or 5 percent, whichever is higher. For the higher TDS implication, a new Section 206AB has been introduced, while higher TCS rate shall apply as per the new Section 206CCA in the following year. So accordingly, higher TDS will be applicable to those having interest income, dividend income, annuity pensions, income from capital gains.

This provision puts the onus of ensuring a higher rate of tax is deducted/collected have been placed on the deductor/collectee, who will now have to request documentation validating proof of submission of ITR in the previous 2 years, increasing the burden of compliance for such deductors/collectee

Example: A contract payment is made by X Co Ltd to Mr. Ram say Rs.90 lakhs for two consecutive years and on which tax under section 194C was deducted (Rs.90,000 in each year) and remitted by X Co Ltd. Mr.Ram however, has not filed his return of income for both the years. In such case, in the third year when these facts are ascertained, the payer must deduct tax at source at the higher rates given above.

A cursory look at the proposals for enhanced rate of TDS / TCS applicable in the event of non furnishing of ITRs for the immediately preceding two previous years show that the taxpayers not only have to do business, earn income and pay tax thereon but also have to work for the Government for creating some trail for the purpose of tax collection by the exchequer without pains.

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Qualification: CA in Practice
Company: Suyash Tripathi & Co. Chartered Accountants
Location: MUMBAI, Maharashtra, IN
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  1. RajkumarMakharia says:

    Sir! , I really convince with the views expressed by CA Mr Suyesh Tyagi on the new two Amdts placed in F.Bill,2021 dt.1st Feb,21.TDS/TCS sections. In this connection I would like to Express more points,which would put Deductor/Collector in Great Tax Zeopardise,Complications. 1.The TDS/TCS taxes are paid for each month end,by 7th of next month.From a very Little time,the Deductor/Collector have to Calculate/Estimate/pay Taxes so payable.Secondly, to Adhare with new norms. & ,to findout,Non I.Tax Return Filers Datta,Tax Collections on heavy Amt.Thirdly, now at present Deductees,even donot Desire to make normal payment of Goods supplied on Credit,How can they pay ,or, We realise Diuble TDS/TCS in short time.4).It would be better,if provisions for Non filers of ITReturns,made to Freaze the TDS/TCS Amt.if they donot file IT Returns for two F.Yrs. This ,Proposal would be more Effective to Insists them,And Alternatively,The usual Tax Deductors/Collectors facing sheveer Burdon on Current exhaustive norms. Hope,The F.M. would definetly,Look,on Reality, & Debar the Busineessman by giving unprecedented loads,Thanks.R.K.Makharia


    This Mode of Tax Collection is The Best way to Make people file their income specially if their spouses are having PAN & Aadhaar and TDS is already being deducted.

  3. Mukesh says:

    X Co Ltd how can know that Mr. Ram say have not file ITR last two year
    if X co Ltd can not know , Due to luck of non file report he may be not deduct
    is there is any tool for file any Mr ram Ray file last two year ITR file or not

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April 2021