The Finance Bill 2025 proposes the removal of Sections 206AB and 206CCA of the Income Tax Act, which currently mandate higher TDS and TCS rates for non-filers of income tax returns. Under these provisions, tax was deducted or collected at a higher rate from individuals who failed to file their returns. The change, effective from April 1, 2025, will eliminate this requirement, addressing the challenges faced by deductors and collectors in determining whether a return has been filed. This removal will simplify the process, enhance business ease, and reduce compliance burdens. However, higher TDS/TCS rates will still apply for transactions involving invalid or missing PAN numbers.
FAQs: Removal of higher TDS/TCS for non-filers of return of income – Budget 2025
Q.1 What are the provisions of section 206AB and 206CCA of the Act.
Ans. Section 206AB of the Act, mandates deduction of tax at higher rate where the deductee is a non-filer of Income Tax Return. Section 206CCA of the Act, mandates collection of tax at higher rate where the collectee is a non-filer of Income Tax Return.
Q.2 What are the changes brought in Finance Bill 2025 in these sections?
Ans. It is proposed to omit these sections from 01.04.2025 onwards.
Q.3 How will these changes benefit the taxpayers?
Ans. For any deductor/collector it is difficult to ascertain whether a return has been filed or not filed by the deductee/collectee. Therefore in case of uncertainty and to avoid default, higher tax is deducted/collected by the deductor/collector. This change will provide certainty and will improve ease of doing business and reduce compliance burden of the deductors/collectors of TDS/TCS taxpayers. However, the higher rates of TDS/TCS in event of invalid PAN or no-PAN shall continue to apply.
Q.4 From which date these sections will not be applicable?
Ans. The provisions of these sections will not be applicable on tax deductions to be made after 01.04.2025.
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