Introduction
New sections were inserted in the Finance Bill, 2021, to deduct TDS (tax deducted at source)/collect TCS (tax collected at source) at higher rates when an amount is paid to certain individuals who have not filed their income tax returns.
Section 206AB:- Deduct TDS at a higher rate than usual when providing payments to individuals who did not file an income tax return the previous year.
The Income Tax Act includes Section 206AB after Section 206AA. The latter permits for larger TDS deductions for those who do not provide/furnish their Permanent Account Number (PAN).
Section 206CCA:- Collect TCS at higher rates than normal from purchase payments.
Similar to that, TCS provision 206CCA is put after Income Tax Act section 206CC. Continue reading for a thorough description of the current CBDT circular no. 10/2022, the compliance check feature, and other topics.
Sections 206AB and 206CCA of the ITR: Tax Deduction or Collection at Source, most recent updates:
The Union Budget 2023 proposes modifying the definition of “specified person” in the Income Tax Act. The modification seeks to provide relief by exempting people who are not required to file income tax returns for the relevant assessment year, as well as non-residents who do not have a permanent presence in India. These people will no longer be deemed non-filers and will not be eligible for larger tax deductions at the source.
Sections 206AB and 206CCA of the Income Tax Act now avoid the following from the definition of “specified person”:
(i) a non-resident who does not have a permanent place of business in India;
(ii) a person who is not required to provide the return for income for the year of assessment relevant to the said previous fiscal year and is notified by the Central Government in the Official Gazette of India in this regard.
Conclusion
Sections 206AB and 206CCA of the Income Tax Act of 1961 aim to ensure that non-filers of income tax returns receive a higher tax deduction or collection at source. These requirements require a higher tax rate to be applied to certain transactions for individuals who have not filed their ITR for the previous two years and have a particular amount of tax liabilities. The goal is to encourage timely ITR submission and increase tax compliance. Taxpayers who are subject to these provisions may incur greater tax deductions or collections on transactions such as dividends, interest, rent, or other specified payments. It emphasises the need of filing ITRs and adhering to tax duties
