The Finance Bill, 2025, proposes several key changes in the Income Tax Act, 1961, to continue reforms in the direct tax system through tax reliefs, removing difficulties faced by taxpayers, and rationalizing1 various provisions. Here are some of the key changes:
Removal of higher TDS/TCS for non-filers of return of income
Higher TDS/TCS for non-filers: Sections 206AB and 206CCA of the Income Tax Act mandate higher TDS/TCS rates for non-filers of income tax returns.
Difficulties: It is difficult for deductors/collectors to verify the filing status of deductees/collectees, leading to higher TDS/TCS, blocked capital, and increased compliance burden.
Removal of sections: The Bill proposes to omit Sections 206AB and 206CCA to address these issues.
Effective date: This amendment will take effect from April 1, 2025.
Removal of higher TDS/TCS for non-filers of return of income
XXI. Removal of higher TDS/TCS for non-filers of return of income
Section 206AB of the Act, requires deduction of tax at a higher rate when the deductee specified therein is a non-filer of income-tax return.1 Section 206CCA of the Act, requires the collection of tax at a higher rate when the collectee specified therein is a non-filer of income-tax return.2 This is subject to other conditions specified in the two sections.
2. Representations were received from various stakeholders that it is difficult for the deductor/collector, at the time of deduction/collection, to verify whether returns have been filed by the deductee/collectee, resulting in the application of higher rates of deduction/collection, blocking of capital and increased compliance burden.
3. Accordingly, to address this issue and reduce compliance burden for the deductor/collector, it is proposed to omit section 206AB of the Act and section 206CCA of the Act.
4. These amendments will take effect from the 1st day of April, 2025.
[Clauses 65, 66 & 68]