Finance Act 2021 has inserted two new section 206AB and 206CCA effective from 1st July 2021. These sections mandated the deduction or collection of Tax at higher rates for specified section in case of certain non-filers. Higher rate is twice the prescribed rates or 5% which ever is higher. If the provisions of section 206AA is applicable to a specified person, in addition to the provision of this section, the tax shall be deducted at higher of the two rates provided in this section and in section 206AA.
I have received the no. of queries with respect to functionality of above sections and how to ensure the specified person for these sections.
The functionality of the sections as per Act has been discussed in below paragraphs.
For applicability of the section 206AB the payment should be made to the specified person and specified person means the person who satisfy both the below conditions
1. Person who has not filed ITR for two assessment years (for which date of ITR u/s 139(1) has expired) relevant to the previous years immediately prior to the previous year in which tax is required to be deducted. AND
For Ex. for as on 30th June 2021, we need to check the ITR filing for two AY for which date of ITR filing u/s 139(1) has expired i.e. AY 2019-20 (PY 2018-19) and AY 2020-21 (PY 2019-20).
2. Aggregate of TDS and TCS is Rs. 50,000 or more in both the two previous years ( in above example in AY 2019-20 and 2020-21 should be more than 50,000 in each assessment year)
Difficulty of Tax Deductor / Collector
Bare reading of sections mandated the tax deductor to check the specified person no. of times during the year for example fist before the due date of filing of ITR u/s 139(1) or after due date of filing of ITR u/s 139(1).
Further the due date in case of different assessee is different so deductor need to check the specified person again on the relevant due date. Further in case of extension of ITR date, the deductor has to again check the specified person on expiry of such extended date.
To remove the above difficulty the CBDT has come with the circular No. 11/2020 dated 21-06-2021 providing functionality to identify the Specified person. To ease this compliance burden the CBDT is coming with new functionality “Compliance Check for Section 206AB & 206CCA”. This functionality is made available through the reporting portal of the income tax department where deductor or collector can check the on single PAN or Bulk PAN basis and can be downloaded in PDF format for record.
CBDT has clarified the below Points through its circular:
1. That a list of specified person is prepared on the start of the financial year 2021-22 taking previous year 2018-19 and 2019-20 who did not file ITR for AY 2019-20 and AY 2020-21.
2. During F.Y. 2021-22 no new names would be added in the list of specified persons to reduce the burden on tax deductor or collector.
3. If any specified person files the valid return for above assessment years 2019-20 and 2020-21 during F.Y. 2021-22 his name would be dropped from the list of specified person on the date of filing of ITR.
4.If any specified person files the valid return for above assessment years 2021-22 his name would be dropped from the list of specified person on the due date of filing of ITR or actual filing date whichever is later.
5. If aggregate of TDS and TCS in previous year 2020-21 is less than 50000, his name would be dropped from the list of specified person.
6. Belated and revised return TCS & TDS return of relevant financial years filed during FY 2021-22 would also be considered.
From above it is clear that the deductor or collector may check the PAN in the functionality at the beginning of the financial year and then he is not required to check the PAN of non-specified person during the financial year as the name can be dropped vide point no. 1 to 6 but no new would be added in the list. So, to check whether any name has been dropped from the list of specified person, deductor or collector need to recheck for above persons only at the time of deduction or collection of tax.
Readers may refer to the above sections and circular for more clarification.