TDS/TCS on non filer at higher rates

Section 206AA of the Act provides for higher rate of TDS for non-furnishing of PAN.

Similarly section 206CC of the Act provides for 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 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 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 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 per cent

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.

Explanation.––For the purposes of this sub-section, the expression “permanent establishment” includes a fixed place
of business through which the business of the enterprise is wholly or partly carried on

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

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

[Clauses 46, 51 and 52]

Clause 46

Amendment of section 194-IB.
46. In section 194-IB of the Income-tax Act, in sub-section (4), for the words, figures and letters “section 206AA, such”, the words, figures and letters “section 206AA or section 206AB, such” shall be substituted with effect from the 1st day of July, 2021.

Clause 51

Insertion of new section 206AB.

Special provision for deduction of tax at source for non-filers of Income Tax Return

51. After section 206AA of the Income-tax Act, the following section shall be inserted with effect from the 1st day of July, 2021, namely:––

‘206AB. (1) Notwithstanding anything contained in any other provisions of this Act, where tax is required to be
deducted at source under the provisions of Chapter XVIIB, other than sections 192, 192A, 194B, 194BB, 194LBC or
194N on any sum or income or amount paid, or payable or credited, by a person (hereafter referred to as deductee) to a
specified person, the tax shall be deducted at the higher of the following rates, namely.

(i) at twice the rate specified in the relevant provision of the Act; or
(ii) at twice the rate or rates in force; or
(iii) at the rate of five per cent..

(2) If the provisions of section 206AA 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.

(3) For the purposes of this section “specified person” means a person who has not filed the returns of income for
both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is
required to be deducted, for which the time limit of filing return of income under sub-section (1) of section 139 has
expired; and the 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:

Provided that the specified person shall not include a nonresident who does not have a permanent establishment in
India.
Explanation.––For the purposes of this sub-section, the expression “permanent establishment” includes a fixed place
of business through which the business of the enterprise is wholly or partly carried on

Clause 52

Insertion of new section 206CCA.

Special provision for collection of tax at source for non-filers of income-tax return.

52. After section 206CC of the Income-tax Act, the following section shall be inserted with effect from the 1st day of July, 2021, namely:––

‘206CCA. (1) Notwithstanding anything contained in any other provisions of this Act, where tax is required to be collected at source under the provisions of Chapter XVII-BB, on any sum or amount received by a person (hereafter referred
to as collectee) from a specified person, the tax shall be collected at the higher of the following two rates, namely:––

(i) at twice the rate specified in the relevant provision of the Act; or
(ii) at the rate of five per cent.

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

(3) For the purposes of this section “specified person” means a person who has not filed the returns of income for
both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is
required to be collected, for which the time limit of filing return of income under sub-section (1) of section 139 has
expired; and the 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:

Provided that the specified person shall not include a nonresident who does not have a permanent establishment in
India.

Explanation.––For the purposes of this sub-section, the expression “permanent establishment” includes a fixed place
of business through which the business of the enterprise is wholly or partly carried on.’.