CA - Ankg & Associates

Recently some amendments were made and Section 206AB and section 206CCA were introduced by Finance Act, 2021 in Income Tax Act, 1961. TDS & TCS provisions of the Income Tax Act and it will be effective from 01st July, 2021.

As per the amendments, effective from 01/07/2021, the Payers / Deductors are required to deduct tax (TDS) at a Higher Rate, for TDS on other than salary payment (or collect tax at Higher Rate in case of TCS) , if the supplier / vendors / payee / deductee / collectee, by whatever name called (herein after referred to as Specified Person),  had not filed Income Tax Returns (ITR) for both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be collected and Time Limit to file Income Tax Return U/s 139(1) has expired.

However if the aggregate of tax deducted at source and tax collected at source in his case is less than Rs.50,000/- in each of these two previous years, then higher rate of TDS or TCS, as the case may be shall not apply

Section 206AB for higher rate of TDS is not applicable where tax is required to be deducted at source under sections 192, 192A, 194B, 194BB, 194LBC or 194N.

Specified Person shall not include a Non-Resident who does not have a Permanent Establishment in India

Click Below to Download Sample format of Declaration to be obtained from the Specified person  

HIGHER RATE OF TDS (Section 206AB)

In case ITRs are not filed by the Specified Person for both two assessment years for which time limit to file the ITR has expired U/s139(1) & aggregate amount of TDS & TCS in each of these years are Rs.50,000/- or more, the rate of TDS will be higher of following (assuming PAN is available in all cases):-

(a) at twice the rate specified in the relevant provision of the Act; or

(b) at twice the rate or rates in force; or (not applicable for TCS)

(c) at the rate of 5 %.

HIGHER RATE OF TCS (Section 206CCA)

In case ITRs are not filed by the Specified Person for both two assessment years for which time limit to file the ITR has expired U/s139(1) & aggregate amount of TDS & TCS in each of these years are Rs.50,000/- or more, the rate of TCS will be higher of following (assuming PAN is available in all cases):-

(a) at twice the rate specified in the relevant provision of the Act; or

(b) at the rate of 5 %.

We are very hopeful that the Government will definitely provide a suitable mechanism to identify the Specified Person where higher rate of TDS / TCS is required. However it is suggested that Deductor / Collector should obtain an undertaking cum declaration from the specified person in this regard.

Click Below to Download Sample format of Declaration to be obtained from the Specified person