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Not filed Income Tax Returns? Get ready for higher rate of TDS/TCS deduction

CMA Ramesh Krishnan 
on 05 February 2021

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The Finance bill 2021, proposes to insert two new sections i.e. Sec.206AB and Sec.206CCA to enable deduction and collection of TDS and TCS at higher rates for those who have not filed their income tax returns. A brief about these sections is given below:

Applicability of the Section.206AB

This section is applicable with effect from 1st July 2021

To whom it’s applicable

This section applies to the persons who are covered under the below criterias:

  1. Those are required to file the Income tax return u/s.139(1) of Income tax act, but not filed the income tax returns for two assessment years prior to the previous year in which tax is required to be deducted. Example incase TDS need to be deducted in previous year 2021-22 then the relevant income tax returns for the Previous  years are  2019-20 & 2020-21   & Assessment years are 2020-21 & 2021-22 and
  2. Aggregate tax deducted at source  for those two previous years Rs.50, 000/- or more each of the previous years
  3. This section will not apply to non-resident who does not have permanent establishment in India
Not filed Income Tax Returns  Get ready for higher rate of TDS/TCS deduction

TDS rates

The TDS rate applicable under this section higher of the below

  1. Twice the rate specified in the relevant TDS sections
  2. 5 %  

In case the person covered under this section also covered the deduction or collection of tax at the higher rate u/s.206AA i.e. PAN not furnished or PAN not available cases, then the rate of tax deduction is higher of sec.206AA and Sec.206AB

However, this new provision does not apply to Sec.192, 192A, 194B, 194BB, 194LBC or 194N  

Applicability of the Section.206CCA

This section applicable with effect from 1st July 2021

 

To whom it’s applicable

This section applies to the persons who are covered under the below two criteria

  1.  Those are required to file the Income tax return u/s.139(1) of Income tax act, but not filed the income tax returns for two assessment years prior to the previous year in which tax is required to be collected . Example incase TCS need to be collected in previous year 2021-22 then the relevant income tax returns for the Previous  years are  2019-20 & 2020-21   & Assessment years are 2020-21 & 2021-22 and
  2. Aggregate tax collected at source at sources for those two previous years Rs.50, 000/- or more each of the previous years
  3. This section will not apply to non-resident who does not have permanent establishment in India
 

TCS rates

The TCS rate applicable under this section higher of the below

  1. Twice the rate specified in the relevant TCS sections
  2. 5 %  

In case the person covered under this section also covered the deduction or collection of tax at the higher rate u/s.206CC i.e. PAN not furnished or PAN not available cases, then the rate of tax deduction is higher of sec.206CC and Sec.206CCA

The object of the above two amendments is to make the person file their income tax returns without fail. To identify the deductee`s return filing status, the deductor may have to collect the return filed acknowledgement or declaration from the deductee


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