Manish Gupta
Quick Summary
Have you filed ITR for the previous two years? If not, then this article can disappoint you. This is the hard truth that the Income Tax Department has introduced a new section 206AB effective from 01.07.2021 that ensures a higher deduction of TDS for the payees who havedefaulted in filing their retu
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FAQ :
Section 206AB, effective from 1st July 2021, mandates higher Tax Deducted at Source (TDS) for individuals who have defaulted in filing their income tax returns for the two assessment years immediately preceding the relevant financial year, provided their total TDS in each of those years was ₹50,000 or more.
A 'specified person' is someone who has not filed an income tax return for the two assessment years relevant to the two previous years immediately preceding the year of TDS deduction, the time limit for filing has expired, and the total TDS was ₹50,000 or more in each of those two previous years.
If a person is a 'specified person', TDS is deducted at the higher of these rates: twice the rate specified in the relevant provision, twice the rate or rates in force, or 5%.
Yes, Section 206AB does not apply to TDS deductions under specific sections, including TDS on Salary (Section 192), TDS on payment of accumulated balance due to an employee (Section 192A), TDS on winnings from lottery or crossword puzzle (Section 194B), TDS on winnings from a horse race (Section 194BB), TDS on Income in respect of investment in securitization trust (Section 194LBC), and TDS on Payment of certain amounts in cash (Section 194N).
The CBDT has introduced a 'Compliance Check for Section 206AB & 206CCA' functionality. Tax deductors can use this online tool to verify if a particular PAN holder is a 'specified person' for the purpose of Section 206AB.
If a deductor fails to comply with Section 206AB, they may be considered an 'Assessee in Default', leading to disallowance of expenditure, levy of penalty, and interest charges under Section 201(1A) of the Act.
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