Finance Act, 2021 introduced new Section- 206AB and section 206CCA of Income Tax Act, 1961 levying a double or higher TDS rate to a Specified Person w.e.f. 1st July, 2021
Section 206AB Applicability:
- This new section requires deduction of TDS at a higher rate while making payment (including payable or credited) to a “specified person”, the tax shall be deducted at 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 specified person fails to furnish his PAN tothe deductor,the provisions of section 206AA (failure to furnish PAN) is also applicable along with section 206AB i.e. tax shall be deducted at 20% or rates applicable as per this section, whichever is higher.
- “Specified person” means a person –
> who has not filed the Income Tax Return (ITR) for 2 immediately preceding previous year; and
> The time limit of ITR filing under sub-section (1) of Section 139 has expired; and
> The aggregate amount of tax deducted at source (TDS) & tax collected at source (TCS) is Rs. 50,000 or more in each of the 2 previous years.
Note: specified person shall not include a non-resident who does not have a permanent establishment in India
- Section 206AB Not applicable if TDS is deductible –
> U/s 192- Salary;
> U/s 192A- Payment of premature accumulated (PF) balance due to an employee;
> U/s 194B- Winnings from lotteryor crossword puzzle;
>U/s 194BB- Winning from horse race;
> U/s 194LBC- Income against investment in the securitization trust;
> U/s 194N- Payments of certain amount/ amounts in cash;
> If the seller is not a Specified person u/s 206AB
Section 206CCA Applicability:
- This new section requires collection of TCS at a higher rate, while receiving payment from a “Specified Person”the tax shall be collected at higher of the following:
> at twice the rate specified in the relevant provision of the Act; or
> at the rate of 5%
- In case the specified person fails to furnish his PAN tothe collector,the provisions of section 206CC (failure to furnish PAN by collectee) is also applicable along with section 206CCA i.e. tax shall be deducted at 5% or rates applicable as per this section, whichever is higher.
- “Specified person” means a person –
> who has not filed the Income Tax Return (ITR) for 2 immediately preceding previous year; and
> The time limit of ITR filing under sub-section (1) of Section 139 has expired; and
> The aggregate amount of tax collected at source (TCS) & tax collected at source (TCS) is Rs. 50,000 or more in each of the 2 previous years.
Note: Further additional explanation point would hold same as mentioned in section 206AB.
Our Action Plan –
> Send mail to vendors for obtaining necessary declaration in their letterhead duly stamped & signed (Attached)
Date:
To
XYZ
………………..,
………………….
…………………..
Re: Declaration for not imposing higher TDS/ TCS rates as per Section 206AB/ 206CCA of the Income Tax Act, 1961
Dear Sir/Madam,
In relation to my/ our business transactions and the requirements of Section 206AB/ 206CCA of the Income Tax Act, I/ we hereby confirm my/ our particulars/ affirm as under:
| SL. No. | Particulars | |
| 1. | Name of Vendor/Entity | |
| 2. | PAN No. | |
| 3. | TAN No. | |
| 4. | I/ We are tax resident of India for the Indian financial year beginning 1st April 2021 | Yes/No |
I/ We further declare that:
I/ We have duly filed return of income, as per the provisions of the Income Tax Act, 1961, for both of the latest 2 financial years, immediately preceding the current financial year and for which the time limit of filing return of income under section 139(1) of the Income Tax Act has expired as on date of this declaration and the details of tax returns filed are as follows: YES/ NO
| Financial Year | ITR Acknowledgement No. | Date of filing ITR |
| 2018-19 | ||
| 2019-20 |
Further, I/ We hereby declare that the information stated above is true and correct and I/ we further undertake to indemnify your entity for any costs, damages and/ or any penal consequences arising to you by relying on my/ our declaration.
____________________
Signed & stamped
Author Bio
Last point of above details of Section 206AB is not applicable to –
> If the seller is not a Specified person u/s 206AB
is this section not applicable, if there is no seller & buyer relation?
i.e. if supplier is Service provider e.g. Consultant.