Proposed Removal of Higher TDS/TCS for Non-Filers of Income Tax Returns

Last updated: 01 February 2025

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Quick Summary

The government is proposing to remove the higher rates of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) that currently apply to individuals who have not filed their income tax returns. This change aims to reduce the compliance burden for businesses acting as deductors or collectors. The proposed amendments are set to take effect from 1st April 2025.

Removal of higher TDS/TCS for non-filers of return of income

Section 206AB of the Act, requires deduction of tax at higher rate when the deductee specified therein is a non-filer of income-tax return. Section 206CCA of the Act, requires for collection of tax at higher rate when the collectee specified therein is a non-filer of income-tax return. This is subject to other conditions specified in the two sections.

Higher TDS/TCS for Non-Filers May Be Removed

2. Representations were received from various stakeholders that it is difficult for the deductor/collector, at the time of deduction/collection, to verify whether returns have been filed by the deductee/collectee, resulting in application of higher rates of deduction/collection, blocking of capital and increased compliance burden.

3. Accordingly, to address this issue and reduce compliance burden for the deductor/collector, it is proposed to omit section 206AB of the Act and section 206CCA of the Act.

4. These amendments will take effect from the 1st day of April, 2025.

[Clauses 65, 66 & 68]

FAQ :

Currently, Section 206AB and Section 206CCA of the Act require tax to be deducted or collected at a higher rate from individuals who have not filed their income tax returns, subject to other conditions.

Stakeholders reported difficulties for deductors/collectors in verifying if returns were filed, leading to the incorrect application of higher rates, blocking capital, and increasing compliance burdens.

It is proposed to omit Section 206AB and Section 206CCA of the Act, thereby removing the requirement for higher TDS/TCS rates for non-filers.

These amendments are proposed to take effect from 1st April 2025.

Deductors and collectors will benefit from a reduced compliance burden, and potentially non-filers will no longer face higher tax deductions or collections.

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Finance news reporter covering taxation, GST, income tax, business compliance, and economy updates. I simplify complex financial topics into easy-to-understand articles for professionals, taxpayers, and business owners on leading finance and tax platforms.

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