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Section 206AB – Special Provision for TDS for Non Filling of Income Tax Return from 1.07.2021 inserted by Finance Act 2021

Applicability of Section 206AB:

♦ This provision is applicable to each and every deductor who is required to deduct TDS under this Act from the person who has not filed his Income Tax Returns (ITR) in the preceding 2 years immediately preceding the previous year for which Tax is required to be deducted and total of TDS and TCS in his case is Rs.50,000/- or more in each of these 2 previous years and due date under section 139(1) of filing of ITR has been expired for such previous years.

♦ For Example, if TDS is required to be deducted for P.Y 2021-22 then the deductor is required to check the ITR for PY 2019-20 and 2020-21 respectively.

Rate of TDS Deduction under Section 206AB:

Higher of the following:

  • At Twice the rate specified in the relevant provision of the Act or
  • At twice the rate or rates in force or
  • At the rate of 5%

In case the deductee does not furnish his PAN then the rate shall be 20%.

Non Applicability of Section 206AB

Section Description
192 Salary
192A Premature withdrawal from the accumulated balance of the provident fund, which is taxable in the employee’s hands
194B Winning from the card game, crossword, lottery, puzzle, or any other games
194BB Winning from a horse race
194LBC Income against investment in the securitisation trust
194 N Payments of certain amount/amounts in cash

Conclusion:-

The above section shall be attracted if both the condition has to be satisfied cumulatively-

1. Non-filling of ITR for 2 preceding previous Year immediately prior to the Previous year for which payment is required to be made

AND

2. TDS or TCS is Rs 50,000/- or More

Consequences in case of non-compliances:

If the deductor fails to comply with above-mentioned provisions then the following no consequences will follow:-

1. He is considered as “Assessee in Default”

2. Levied penalty for non-compliance of TDS Provisions under section 201A

3. Disallowance of Expenditure

4. Interest on late payment and late fee

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