Section 206AB of the Income Tax Act, 1961 provides for deduction of TDS at a higher rate for deductees who have not filed their Income Tax Returns for each of the last two assessment years for which the due date of filing ITR has also expired, and they had an aggregate TDS and TCS of over Rs. 50,000 in each of those two years.
Effective Date: 1st July, 2021
Eligible Deductor: Person making payment to a "Specified Person" deductee
Specified Person (Deductee): Any person who:
(i) has not filed the ITR for the past two assessment years preceding the current year of tax deduction; and
(ii) the due date of filing u/s 139(1) for the preceding assessment years has also expired; and
(iii) such person has an aggregate TDS and TCS of at least Rs. 50,000 in each of the preceding two assessment years
A non-resident person who does not have a Permanent Establishment (PE) in India would not be covered in this definition.
Higher Rate of TDS Applicable: The applicable higher rate of TDS/TCS under the provisions of these sections would be the highest of:
(i) 2x the rate specified in the Act or 2x the rate in force; or
(ii) 5%
If the person does not have a PAN and TDS is required to be deducted at a higher rate u/s 206AA, then the rate of deduction would be highest between 206AA and 206AB.
Payments Excluded from Higher Rate Deduction
192: Salary
192A: Higher EPF Withdrawal
194B: Lottery Winnings
194BB: Winning from Horse Races
194LBC: Securitization Trust
194N: Cash Withdrawal
Payments Covered for Higher TDS Deduction (All TDS Sections other than Exclusions above)
All payments covered under the following indicative list of sections are included. However, this is not an exhaustive list.
194: Dividend
194A: Interest other than on Securities
194C: Contractor / Sub-Contractor
194H: Commission or Brokerage
194I: Rent
194J: Fees for Professional or Technical Service
194Q: Payment to Resident for Purchase of Goods
Applicability for TCS
Section 206CCA of the Act would apply on any sum or amount received by a person (collectee) from a Specified Person. The proposed TCS rate in this section is higher of the following rates:
(i) 2x the rate specified in the relevant provision of the Act;
(ii) 5%
