In order to penalize those who don’t file income tax returns (ITRs) despite being liable to, the government has proposed new Section 206AB and 206CCA in Union Budget 2021. These are special provision for deduction and collection of tax at source at a higher rate for certain non-filers of Income tax return. Applicability and analysis of these sections have been summarized as under:
Effective Date of applicability:
Section 206AB and 206CCA are effective with effect from
1st July, 2021
Section
206AB:-
Where tax is required to be deducted at source
under Income Tax Act, on any sum or income or amount paid, or payable or
credited, by a person (i.e. deductee) to a specified
person, the tax shall be deducted at higher of the following rates,
namely:—
(i) at twice the rate specified in the
relevant provision of the Act; or
(ii) at twice the rate or rates in force; or
(iii) at the rate of five per cent.
Further it is to be noted that If the provisions of section 206AA is applicable to a specified person, in addition to the provision of this section, the tax shall be deducted at higher of the two rates provided in this section and in section 206AA.
Section
206CCA:-
Where tax is required to be collected at source
under Income Tax Act, on any sum or amount received by a person from a specified person, the tax shall be
collected at higher of the following two rates, namely:—
(i) at twice the rate specified in the
relevant provision of the Act; or
(ii) at the rate of five per cent.
Meaning of
specified persons: -
Sub-Section (3) of Section 206AB/206CCA defines "Specified
persons" as under-
(i) Person who has not filed the Income Tax Return
for two previous years immediately before the previous year in which tax is
required to be deducted/collected;
(ii) Time limit to file ITR under section 139(1)
has expired; and
(iii) The aggregate TDS or TCS is Rs. 50,000 or
more in each of the two previous years.
Therefore, For F.Y. 2021-22, specified person shall mean those persons who have not filed their ITR for both the F.Y. 2018-19 & F.Y. 2019-20 and whose total tax deducted/collected during each of F.Y. 2018-19 & F.Y. 2019-20 were Rs. 50,000/- or more.
Non-Applicability
of Section 206AB and 206CCA:-
Provisions of Section
206AB and Section 206CCA are not applicable to a non-resident who does
not have a permanent establishment in India.
Further, provisions of section 206AB do not apply to any sum or income or amount paid or
payable or credited on which tax is deductible at source under following
sections:
Section 192–
Salary
Section 192A–
Payment of accumulated balance due to an employee
Section 194B–
Winnings from lottery or crossword puzzle
Section 194BB–
Winning from a horse races
Section 194LBC–
Income in respect of investment in secularization trust
Section 194N– Payments of certain amounts in cash
To ease this compliance burden the Central Board of Direct Taxes is issuing a new functionality “Compliance check for section 206AB and 206CCA”. This functionality is made available through reporting portal of the Income-tax Department. The tax deductor or the collector can feed the single PAN (PAN search) or multiple PANs (bulk search) of the deductee or collectee and can get a response from the functionality if such deductee or collectee is a specified person.
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