Section 206AB of the Income Tax Act is recently introduced vide the Finance Act, 2021. Section 206AB mandates the person to deduct TDS in case of non-filing of an income tax return by the specified person.
The present article briefly explains the provisions of section 206AB; the meaning of the term specified person; rate of TDS deduction; effective date of provisions of section 206AB and exemption available under section 206AB.
Page Contents
Provision of section 206AB of the Income Tax Act–
The provision of section 206AB of the Income Tax Act are simplified and explained below-
| Particulars | Details |
| Who is liable to deduct TDS? | The person paying any sum to the specified person. |
| Amount on which TDS is to be deducted | Any amount/ sum/ income paid or payable or credited to the specified person. |
From the above table, one can easily figure out that it is important to understand the term ‘specified person’ and the same is briefly explained below.
Meaning of the term ‘Specified Person’ for Section 206AB
The term ‘specified person’ is explained under section 206AB(3). The coverage and non-coverage of the term is explained hereunder-
| Coverage | Non-coverage |
| The term ‘specified person’ includes the person who satisfies all the following criteria-
1. The person has not filed income tax return of two previous years immediately before the previous year in which TDS is required to be deducted; 2. The time limit of filing of an income tax return as per section 139(1) is expired; and 3. The total TDS and TCS is INR 50,000 or more in each of the two previous years. |
The term ‘specified person’ doesn’t include a non-resident not having a permanent establishment in India. |
Rate of deduction of TDS under section 206AB
TDS under section 206AB will be deducted at higher of the following rates-
- Twice the rate as specified under the relevant provision of the Income Tax Act; or
- Twice the rate/ rates in force; or
- At the rate of 5%.
The effective date of provisions of section 206AB
The newly inserted provisions of section 206AB of the Income Tax Act will be effective from 1st July 2021.
Exemption under section 206AB
Provisions of section 206AB do not apply to the following tabulated TDS sections of Income Tax Act-
| Sr. No. | Section | Description |
| 1 | Section 192 | Salary |
| 2 | Section 192A | Premature withdrawal from the accumulated balance of Provident Fund which is taxable in the employee’s hands. |
| 3 | Section 194B | Winning from the card game, crossword, lottery, puzzle or any other games. |
| 4 | Section 194BB | Winning from horse race. |
| 5 | Section 194LBC | Income against investment in the securitization trust. |
| 6 | Section 194N | Payments of certain amount/ amounts in cash. |
Applicability of both section 206AA and 206AB-
Section 206AA of the Income Tax Act mandates the person to deduct TDS at higher rates in case of non-availability of PAN.
Now, in case both the provisions of section 206AA and section 206AB applies to the ‘specified person’. Then, TDS would be deducted at the higher of the two rates prescribed under section 206AA and section 206AB.
Synopsis-
| Particulars | Details |
| When the provision of section 206AB get attracted? |
1. Has not filed an income tax return for preceding two previous years; 2. The time limit for filing the return is expired; and 3. TDS and TCS is INR 50,000 or more in each of the two previous years. |
| When to deduct TDS under section 206AB? | When any sum/ income/ amount is either paid or payable or credited. |
| TDS is deductible at which rates? | Higher of-
|
| Provisions of section 206AB are to be applied while deducting TDS under all the sections? | No, provisions of section 206AB are not applicable when TDS is deductible under section 192; section 192A; section 194B; section 194BB; section 194LBC or section 194N. |
Author Bio
If for AY 2019-20 and 2020-21 belated returns u/s 139(4) is filed and TDS > 50,000 is 206AB applicable?
My income from FD in all banks is less than ₹3 lakhs. So I have not filed ITR for 9 years after my retirement. Now with Section 206AB will TDS be deducted for me. I give 15 H form to all banks where I have FDs. Do I need to file ITR if my income is below ₹3lakhs?. It is not clear so please let me know.
sir here in the conditions it has shown that tds & tcs shoulde be inr 50000 or more.. so sir here in this conditions both tds & tcs together amould should be < 50000????? or tds <50000 & tcs <50000?
The aggregate of TDS & TCS shall not exceed Rs 50000
Position 1 The Assessee has not filed his returns for the last two years and his TDS has been below Rs.50000/- in both the years.
Position 2 The Assessee has been filing his return and for the last two years his TDS has been below Rs.50000 in both the years.
Whether 206AB would be attracted
No, All four criteria are required for 206AB
Returns for both the previous years not filed AND aggregate of TDS & TCS > 50000 in both the previous years
if any deductee with rate 1 or 2% than we will deduct 5% but if deductee is professional than rate will be??
Please suggest!
20%
The tax shall be deducted at the higher of the following rates:-
(i) At twice the rate specified in the relevant provision of the Act
(ii) At twice the rates in force
(iii) At the rate of five percent
if the buyer has not filed ITR for one year and has filed ITR for another year, do we need to deduct TDS at higher rate as per 206AB ?
No,
Higher tax is applicable when the deductee has not filed the returns of income for BOTH of the two financial years
“at twice the rate specified in the relevant provision of the Act”
Question – Is twice rate is deductible when declaration is not recd from customer who provide LDC, specified rates ?
Section says that TDS and TCS is INR 50,000 or more in each of the two previous years.
Whether it should be total TDS including other parties or TDS of Transaction done with us??
Last two years i am not eligible to file the IT… if current year i am eligible to deduct tds…then TDS is deductible at which rates?
Is section 206ab applicable for super senior citizen.
RS 50000 LIMIT IS APPLICABLE FROM SAME DEDUCTOR OR FROM ALL
FROM ALL DEDUCTOR
it should be from all deductor . check your 26AS form
SIR WE HAVE FILED LAST TWO YEARS IT
NOW I HAVE TO DEDUCT TDS5% FROM JULY ONWARDS
as you have filed return . your deduction will be as per normal rate , not 5 %
How will the deductor know whether the person has filled IT returns for last 2 years
asking declaration with acknowledgement no. of return filed
I want clear one-thing individuals Rs.50000/- TDS amount or TDS deduct able amount (paid expenses amount)
deducted TDS amount . which is shown in your 26AS
TDS deducted . check your 26 AS
WHETHER HIGH RATE OF TDS WILL BE APPLICABLE IF RETURNS OF LAST YEARS HAD BEEN FILED BUT TDS IN ONE YEAR IS LESS THAN RS. 50000.
NO, there will be normal tax rate applicable. as you are not covered in specified person
If assessee filling ITR previous last two years below Rs. 1.5 lac I. e. Gross Total income. It is not mandatory to file ITR as the Gross Total Income is below Rs. 2.5 lac. My question is that to avoid the notice from income tax department for non filling ITR what correspondence should do earlier by the assessee.
very well illustrated due to which it is easy to understand. Thanks !!!!