Special provision for deduction of tax at source for non-filers of Income Tax Return
- Section 206AB For TDS
- Section 206CCA For TCS
- Effective Date: 01st July 2021
- Effective Assessment Year: 2022-23
- The Finance Budget was presented on 1st Feb 2021 by our Hon'ble Finance Minister.
- Several amendments in various sections of the Income-tax legislations were proposed.
- Out of all the above proposals, one amendment which caught special attention was the introduction of TDS/TCS at higher rates in case of non-filers of Income-tax returns
What is Sec 206AB?
- Where tax is required to be deducted on any sum or income or amount paid under Chapter VIIB except as specified by a person to a specified person, TDS shall be deducted at higher of (i) at twice the rate in relevant provisions (ii) at twice the rate in force (iii) at 5%
- Applicable for payments made or sums or income on or after 1st Jul, 2021(previous year 2021-22)
- Relevant two previous year shall be 2019-20 and 2020-21
Applicability of section 206AB on various sections under Chapter XVIIB
Sections excluded under Chapter XVIIB
- 192- TDS on Salary
- 192A- TDS on payment of accumulated balance due to an employee
- 194B- TDS on winnings from lottery or crossword puzzle
- 194BB- TDS on winnings from horse race
- 194LBC- TDS on income in respect of investment in securitization trust
- 194N- TDS on payment of certain amounts in cash
Sections included under Chapter XVIIB
- All other sections which are specifically excluded
Definition of Specified Person
- Not filed the returns of income for both of the two assessment years immediately prior to the previous year in which tax is required to be deducted, and
- Time limit of filing return of income u/s 139(1) has expired; and
- Aggregate of tax deducted & collected at source is rupees >=50,000 in each of these two previous years
Note: In order to calculate the applicability for TDS/TCS>=50,000 u/s 206AB/206CCA, both TDS and TCS credits should be aggregated. This is a drafting error in the opinion of author as TCS is governed and regulated u/s 206CCA read with 206C. One cannot deduct TDS on amounts/incomes/sums on which TCS is applicable.
To increase the taxpayer base in the country, the non-filers are now obligated to file income-tax return.
Further, the same income would be taxed at two different points of time:
(i) at the time of payment or credit
(ii) at the time of determination of non-compliance
- 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 five per cent.
To read the full article, find the enclosed file
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