The Finance Act, 2021 has inserted two new sections, namely, section 206AB and section 206CCA to the Income Tax Act. Both the sections are inserted to encourage regular income tax return filing. Further, both the sections impose higher deduction of TDS and/ or higher collection of TCS in case the specified person has not filed an income tax return.

The present article covers the provisions of section 206CCA which requires the higher collection of TCS in case of non-filing of an income tax return by the specified person.

Provisions of section 206CCA of the Income Tax Act

The provisions of section 206CCA get attracted when the following conditions are satisfied-

Condition 1 – The person is already liable to collect TCS from the specified person; and

Condition 2 – Such a specified person fails to furnish the required income tax return.

Once both the above conditions are satisfied, the person would be liable to collect TCS at higher rates as prescribed under section 206CCA of the Income Tax Act.

Meaning of the term ‘specified person’-

The term specified person means the person who satisfies all the below criteria-

1. The person has not furnished income tax return for preceding two previous years immediately before the previous year in which TCS is to be collected; and

2. The time limit for furnishing income tax return as per section 139(1) has already expired; and

3. The aggregate of TDS (tax deduction) and TCS (tax collection) is INR 50,000 or more in each of the two previous years.

Notably, the term specified person doesn’t include a non-resident person not having a permanent establishment in India.

Rate of TCS collection under section 206CCA

As and when the provision of section 206CCA gets attracted, the tax would be collected at higher of the following rates-

  • Twice the rate specified as per provisions of the Act; or
  • At the rate of 5%.

Combine applicability of section 206CC and section 206CCA

Provisions of section 206CC of the Income Tax Act mandates the liable person to collect TCS at a higher rate if in case the specified person fails to furnish the permanent account number (i.e., PAN).

However, in case the specified person fails to file the income tax return as well as fails to furnish the PAN. Then, both the provisions i.e., section 206CC and section 206CCA becomes applicable.

In such a situation, TCS will be collected at higher of the two rates prescribed under section 206CC and section 206CCA of the Income Tax Act.

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