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Income Tax Return filing: Applicable of at higher rates TDS/TCS on non filed the ITR on time (New Section 206AB and Section 206CCA)
A higher rate of TDS for Non-Filer of Income Tax Return has been implemented in Budget 2021.
The Proposed Section:
1. Section 206AB was proposed in the Act as a special provision allowing for a higher rate of an income tax return for TDS for non-filers.
Any sum of income or amount charged or payable or credited by an individual (hereinafter referred to as a deductee) to a designated person will be protected by the proposed section 206AB of the Act.
This provision shall not implement where tax is required to be deducted as per sections 192, 192A, 194B, 194BB, 194LBC, or 194N under Income Tax Act, 1961.
The suggested TDS rate in this section is higher than the following rates,
- 2 Time of rate applicable as per the relevant provision of the Income Tax Act; or
- 2 Time of the rate or rates in force; or
- The 5 percent rate
As the provision of section 206AA of the Act is applicable to the specified individual, in addition to the provisions of this section, the tax shall be deducted at a higher rate than the two rates provided for in this section and in section 206AA of the Act.
2. Section 206CCA has been proposed to provide for a higher rate of TCS for non-filers of income tax returns.
Any sum or amount obtained by a person (hereinafter referred to as the collector) from a designated person will be subject to the proposed section 206CCA of the Act.
In this section, the proposed TCS rate is higher than the following rates:-
- 2 time of rate specified in the relevant section of the Income Tax Act or
- The 5 % Rate
As, the provision of section 206CC of the Act is applicable to the specified individual, in addition to the provisions of this section, the tax shall be charged at a rate higher than the two rates provided for in this section and in section 206CC of the Act.
When will this section's (Section 206CCA & Section 206AB) requirement apply?
- The specified person is a person who has not submitted returns of income for any of the two years of assessment year related to the 2 preceding years immediately prior to the preceding year in which tax is expected to be deducted or collected as the case may be.
- Furthermore, the time limit for filing a tax returns per section 139(1) of the Income Tax Act has expired for both of these assessment years.
- There is another requirement that, in his case, the aggregate of tax deducted at source and tax received at source is fifty thousand rupees or more in either of the preceding two years.
- These changes will take into effect from 1st July 2021.
Purpose of (Section 206CCA & Section 206AB) increase in compliance burden
- The purpose of the Government is likely to be to compel consumers themselves to compel their suppliers to comply with the requirements on income tax and to file everyone’s ITR and their commitment to increase compliance with income tax. Even so, it may create a major burden of compliance for taxpayers with a huge number of providers to whom such regulations would apply. We will have to wait and see how the sector reacts to this provision and compile with it.
Conclusion:
In order to have a better knowledge of the newly inserted section, let us first know the applicability of Section 206AA & 206CC in brief as the following -
Above Section 206CC & 206AA shall apply if the person fails to provide the PAN, wherein case the person is responsible for deducting/collecting the tax, as the case may be, is asked to apply the tax rate at the higher of the aforementioned:
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Tax is required to be collected |
Tax is required to be deducted |
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(i) at 2 times of the rate specified in the relevant section provision of this Act; |
(i) at the rate specified in the relevant provision of this Act; |
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(ii) at the rate of 5%: |
(ii) at the rate or rates in force; or |
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(iii) at the rate of 20%: |
TDS Deduction Rate Chart for (AY 2023-2024) FY 2022-2023
