Compliance Check Functionality for Section 206AB & 206CCA

TDS / TCS - Compliance Functionality for Section 206AB & 206CCA for Non-filers using Online Utility

A new tax rule relating to TDS and TCS has come into force from 01.07.2021 under which, taxpayers who have not filed their Income Tax Returns for the past two Financial Years shall have to pay a higher tax. It is important to note here that the Income Tax Department had introduced two new sections namely Section 206AB and Section 206CCA with a purpose of deducting TDS at a higher rate for certain non-filers. Also, the Income Tax Department has introduced a tool named Compliance Check Functionality for Online Utility.

New TDS / TCS Provisions w.e.f. 1st July 2021

With the insertion of these sections namely Section 206AB and Section 206CCA w.e.f. 1st July 2021, it requires the specified persons to deduct TDS and TCS at a higher rate.
Tax Deducted at Source or Tax Collected at Source will be charged at double the rate specified in the relevant provision of the IT Act or 5%.

Compliance Check Functionality for Section 206AB and 206CCA

Applicability of the new provisions for TDS / TCS

The provisions of this section shall apply to TDS deductions only on payments made by the residents in the form of shareholder dividends, service payment to vendors, rent
However, it shall not apply to salary, winnings from lottery or crossword, horse race, trust income and cash withdrawals.
Also, the higher rate of Tax Deducted at Source shall not apply in the case of an NRI who does not have any permanent establishment in India.

Who are the Specified Persons?

As per the Finance Act, 2020, the person who has not filed his ITR for the previous two fiscal years.
And whose the total amount of Tax Deducted at Source and Tax Collected Source during each of these two financial years is Rs.50,000 or more.

Higher rate of TDS

The new rate will be higher of the following rates:

Twice the tax rate specified under the relevant provision of the Act OR
Twice the rate or rates in force OR
At the rate of 5%.

CBDT's tool to check compliance

To help the taxpayers of TDS and TCS to follow the Compliances of these sections, the IT Department has introduced a new 'Compliance Check Functionality for Section 206AB and 206CCA'. This new tool enables the tax deductors / collectors to verify the specified person as defined in the Finance Act, 2020. It is expected that this functionality will east the compliance burden on taxpayers. However, this tool is already functioning through the reporting portal of the IT department.'

How to check Compliance Functionality for Section 206AB & 206CCA?

The Tax Deductors can now check whether or not an individual has filed returns or not on the official website of the Income Tax Department. There is a utility available on the reporting portal whereby entering the PAN number, the deductors will be able to check the last return filed by an individual.

The taxpayers can use the new Compliance functionality via the reporting portal of the IT department.
The deductors or the collectors of the TDS/TCS can either check a single PAN or check multiple PANs at the same from the online utility.
On a single PAN search, the response will be displayed on the screen, which would be in PDF and shall be downloadable.
The response for bulk search would be in the form of a downloadable file.
To ease the burden of repeatedly checking PANs, the IT department gave clarification that the PAN(s) once checked in the fiscal year and marked as non-specified need not be re-checked.
There shall be no addition of any names to the list of specified persons once prepared at the beginning of the FY.
However, there may be chances that the specified persons may move out of the list during the financial year.
Hence, re-checking will be required when making tax deductions or tax collections for these (specified person) PAN(s).

It is important to note here that the burden of compliance is on the the person⁠, who may be a prompt filer of returns deducting the tax. CBDT quotes to these effects that 'To ease this compliance burden, the Central Board of Direct Taxes has issued a new functionality. Compliance Check for Sections 206AB & 206CCA. This functionality is already functioning through the reporting portal of the income tax department.'