New TDS & TCS section- 194Q, 206AB, 206C(1H), 206CCA

Easy Guide to Implementation of new TDS and TCS section- 194Q, 206AB, 206C(1H), 206CCA

Three upcoming provisions of the Income Tax Act, which will come into effect from 1^st July 2021, has tremendously increased complexity for all Accountants and Professionals. Where Section 194Q deals with TDS on Sale of Goods, Section 206AB & 206CCA is inserted to penalise the person who was liable but did not file their Income Tax Return. In the last article, the applicability of section 194Q and the case where section 206C(1H) to be charged was discussed in detail ( CLICK HERE ). In this article, section 206AB & 206CCA will be discussed in detail. Also, steps that one should take to ensure that all four interlinked sections are properly complied with are discussed here.

Ø Sec 206AB & Sec 206CCA

Section 206AB mandates the person to deduct TDS at a higher rate in case of non-filing of an income tax return by the specified person, whereas section 206CCA mandates the person to collected TCS at a higher rate in case of non-filing of an income tax return by the specified person.

• Rate of TDS – Higher of

1) 2 times applicable rate of TDS / TCS

2) At the rate of 5%

If the provision of section 206AA/206CC (doesn’t have PAN or Aadhaar), applies to a specified person, in addition to the provision of this section, the tax shall be deducted at higher of the rates provided in this section and in section 206AA/206CC

• Definition of Specified Person:- includes the person who satisfies all the following criteria-

1) He has not filed ITR for both of the last 2 years whose due date of ITR is expired. AND

E.g.- Due date for ITR of FY 2020-21 is not yet expired and is currently due on Nov-21. Hence till the end of Nov-21, the last 2 years to check whether he has filed a return are 2018-19 & 2019-20. As soon as the due date of 2020-21 expires, 2 years to check will be 2019-20 & 2020-21.

2) More than Rs. 50000/- total TDS AND TCS has been deducted in his case for both of the last 2 year.

• Circumstances where provisions are Not Applicable –

1) Deductee is a non-resident who does not have a permanent establishment in India.

2) TDS is applicable under any of the following sections:-

1. Sec 192  – TDS on Salary

2. Sec 192A   – TDS on Premature withdrawal from EPF

3. Sec 194B – TDS on winnings from lotteries

4. Sec 194BB  – TDS on winnings from horse races

5. Sec 194LBC – TDS on investment in securitization fund

6. Sec 194N  – TDS on Payment of a certain amount in cash

Section 206AB & 206CCA is not only applicable to Section 194Q & 206C(1H) but to all TDS & TCS sections except Sec 192, 192A, 194B, 194BB, 194LBC, 194N

Ø Implementation of Sec 194Q, 206C(1H), 206AB, 206CCA

Understanding all four provisions & their interconnection is quite difficult. Hence, here we will discuss the step by step procedure that one should do to ensure that he complies with all the provisions.

1) Obtain the following details from the Customer:-

1. Last Year turnover

2. Acknowledgement no. & date of filing of ITR of 2018-19 & 2019-20

3. Total TDS & TCS deducted in 2018-19 & 2019-20

4. A declaration that whether he will deduct TDS on goods, if applicable.

2) Obtain the following details from Vendor:-

1. Last Year turnover

2. Acknowledgement no. & date of filing of ITR of 2018-19 & 2019-20

3. Total TDS & TCS deducted in 2018-19 & 2019-20

3) Update correct PAN data in your Master file.

4) On 30^th June, Track for which Customers you had Transaction of more than Rs. 50 Lakhs.