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Higher Rates of TDS/TCS for non-filers of ITR | Budget-21

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Higher Rates of TDS/TCS for non-filers of ITR.

Section 206AA of the Act (Income Tax Act, 1961) provides for the higher rate of TDS for non-furnishing of PAN. Similarly, section 206CC of the Act provides for the higher rate of TCS for non-furnishing of PAN.

It is seen that while these provisions have served their purpose in ensuring obtaining and furnishing of PAN by the various person, there is need to have similar provisions to ensure filing of return of income by those person who have suffered a reasonable amount of TDS/TCS.

Hence, it is proposed to insert a new section 206AB in the Act as a special provision providing for higher rate for TDS for the non-filers of income-tax return. Similarly, it is proposed to insert a section 206CCA in the Act as a special provision for providing for the higher rate of TCS for non-filers of income-tax return.

Proposed section 206AB of the Act would apply on any sum or income or the amount paid, or payable or credited, by a person (herein referred to as deductee) to a specified person. This section shall not apply where the tax is required to be deducted under sections 192, 192A, 194B, 194BB, 194LBC or 194N of the Act. The proposed TDS rate in this section is higher of the followings rates:-

  • Twice the rate specified in the relevant provision of the Act; or
  • Twice the rate or rates in force; or
  • The rate of five percent

If the provision of section 206AA of the Act 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 of the Act. Proposed section 206CCA of the Act would apply on any sum or amount received by a person (herein referred to as collectee) from a specified person. The proposed TCS rate in this section is higher of the following rates:

  • Twice the rate specified in the relevant provision of the Act; or
  • The rate of five percent

If the provision of section 206CC of the Act is applicable to a specified person, in
addition to the provision of this section, the tax shall be collected at higher of the two rates provided in this section and in section 206CC of the Act.

The specified person is a person who has not filed the returns of income for both of the two assessment years relevant to the two previous years which are immediately before the previous year in which tax is required to be deducted or collected, as the case may be.

Further, the time limit for filing tax return under sub-section (1) of section 139 of the Act has expired for both these assessment years. There is another condition that aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in each of these two previous years. Specified person shall not include a non-resident who does not have a permanent establishment in India.

Consequential amendment is proposed in sub-section (4) of section 194-IB of the Act.

This amendment will take effect from 1st July, 2021.


Source: Union Budget

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