TDS/TCS UPDATES EFFECTIVE FROM 01/07/2021 - PART 1

CA in Nagpur India

Part-1-Higher rate of TDS/TCS for non-filers of Income Tax Returns

Laxman: - Do you have any idea about Section 206AB that has come in the Finance Act 2021?

Ram:- Yes Laxman,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.It mandates the person to deduct TDS in case of non-filing of an Income Tax return by the specified person.

Laxman: - What is the criteria for Section 206AB?

Ram:- Section 206AB/206CCA defines a Specified Person as: Person who has not filed the Income Tax Return for 2 previous years immediately before the previous year in which tax is required to be deducted. The time limit of ITR filing under sub-section(1) of section 139 is expired and aggregate TDS/TCS is Rs. 50,000 or more in each of the 2 previous years.

Laxman: - What is the effective date of Provisions of section 206AB?

Ram:- The newly inserted provisions of section 206AB of the Income Tax Act will be effective from 1st July2021.

Laxman: - Whether Section 206AB is applicable on all payments liable to TDS?

Ram:- No, This section is applicable only on the payments where tax is required to be deducted at source under the provisions of Chapter XVI IB, other than the provisions of section 192,192A.194B,194BB,194LBC or 194N.

SECTIONDETAILS
192TDS on Salary
192ATDS on Premature withdrawal from EPF
194BTDS on Lottery
194BBTDS on Horse Riding
194LBCTDS on Income in respect of investment in securitization trust
194NTDS on cash withdrawal in excess of 1 crore

Laxman:- At what rateTDS is required to be deducted under section 206AB?

Ram: - Higher of the following rates:-

  1. Twice the rate specified in the relevant provision of the act (e.g. 194C @2% *2 = 4%, 194J = 20%) or
  2. At twice the rates in force; or
  3. The rate of five percent

Laxman:- What is 206CCA?

Ram:- Tax deducted at source for non-fillers of income tax return. Proposed section 206CCA of the Act would apply on any sum or amount received by a person from a specified person.

Laxman:- When 206CCA is applicable?

Ram:- At the time of receipt from a specified person.

Laxman:- At what rateTCS is required to be deducted under section 206CCA?

Ram: - Higher of the following rates:-

  1. At twice the rate specified in relevant provisions of the Act [Scrap @ 1% *2 = 2%, Sale = 0.2%], or
  2. At the rate of 5%