Section 206AB and 206CCA of Income Tax Act

• Taxation
• ||
• May 5, 2022

According to Income Tax Act penalizing those who don’t file income tax returns despite being liable to pay tax, the Central Government has proposed new sections 206AB and 206CCA in the Union Budget 2021. This section impose higher TDS/TCS rates if the transactions are done with the non-filers of income tax returns.

The responsibility of deducting the TDS/TCS at a higher rate lies with the deducted/collector on any amount paid/collected from the specified person.

• A specified person is the person has not filed an income tax return (ITR) for two years immediately before the previous year in which tax is due. Therefore, the filing deadline has passed under section 139.
• In each of the previous two years, the total TDS or TCS was Rs. 50,000 or more.

Specified person shall not include a non-resident individual who doesn’t have a permanent establishment in India.

Non Applicability
Deduction under Section 206AB is not allowed if tax is deducted under the following sections

Rate of TDS to be deducted u/s 206AB
Section 206AB specifies that if the amount is paid/credited to a specific person, it shall be subject to TDS at the highest rate/rates specified in the relevant provision of the Act or at twice that rate/rates in effect at 5%. Assume that Section 206AA are also applicable to a particular individual. The higher of the two rates provided in this section and Section 206AA shall be applied in such a case.

Rate of TCS to be collected u/s 206CCA
206CCA specifies the applicable rate if the amount is received from a specified person, which is the higher of the below rates at twice the rate stated in the relevant provision of the Act, or the rate of 5%. Specifically, suppose the provisions of Section 206CC apply to a specified person, then, in addition to the provisions of the above section. In that case, the tax shall be collected at a higher rate which will be more than the two rates provided in this section and Section 206CC. 

At AJSH, we assist our clients with various income tax compliances, including income tax assessments, ITR filings, tax advisory, TDS matters other related services by providing them adequate support and guidance from our end. If you have any questions or wish to know more about section 206AB and 206CCA of Income Tax Act, kindly contact us.