Important Keyword: Income Tax, Section 206AB, Section 206CCA.

Section 206AB and 206CCA of Income Tax Act

Sections 206AB and 206CCA are recent amendments to the Income Tax Act. These sections introduce provisions for the deduction and collection of tax at source at higher rates for specified persons who have not filed their income tax returns. This measure aims to encourage timely filing of income tax returns and compliance with tax regulations. The implementation of these sections commenced from July 1st, 2021.

What are Sections 206AB and 206CCA?

Section 206AB pertains to the deduction of Tax Deducted at Source (TDS) at a higher rate for individuals who have not filed their income tax returns. On the other hand, Section 206CCA relates to the collection of tax at source at a higher rate from buyers who have not furnished their income tax returns. These provisions aim to incentivize timely filing of income tax returns and promote compliance with tax regulations by imposing higher TDS and TCS rates on non-filers.

Rates for Deduction or Collection of Tax under section 206AB and 206CCA

TDS

Tax will be deducted at the higher of the following rates:

• Twice the rate specified in the relevant provision of the Act; or
• Twice the rate or rates in force; or
• At the rate of 5%

TCS

Tax will be collected at the higher of the following rates:

• Twice the rate specified in the relevant provision of the Act; or
• At the rate of 5%

Applicability of Sections 206AB and 206CCA

The sections 206AB and 206CCA do not apply to a non-resident without a permanent establishment in India. Additionally, the provisions of section 206AB do not apply to any sum or income for which tax is already deducted at source under the following provisions of Chapter XVIIB:

• Section 192: Salary
• Section 192A: Premature withdrawal of EPF
• Section 194B: Winnings from lottery, card games, crosswords, or puzzles
• Section 194BB: Winnings from horse races
• Section 194LBC: Income from investment in securitization trust
• Section 194N: Cash withdrawals exceeding specified limits

These sections, 206AB and 206CCA, are applicable to specified individuals meeting the following criteria:

• The individual has not filed their Income Tax Return for the two previous years immediately preceding the previous year in which tax is required to be deducted or collected.
• The time limit for filing such an income tax return under section 139(1) has expired.
• The aggregate of tax deducted or collected at source in each of these two financial years is INR 50,000 or more.

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Official Income Tax Return filing website: https://incometaxindia.gov.in/