The Finance bill 2021, proposed to insert a new section 206AB for deduction of TDS at higher rates for those who have not filed their Income Tax Return. Here are the details of the new section 206AB of the Income Tax Act, 1961.
Proposed section 206AB of the Act would apply on any sum or income or the amount paid, or payable or credited, by a person (herein referred to as deductee) to a “specified person”.
Here “specified person”, has been defined under subsection (3) as a person, who has not filed the returns of income for both of the 2 assessment years relevant to the 2 previous years which are immediately before the previous year in which tax is required to be deducted or collected, as the case may be“.
Condition for deduction of TDS u/s 206AB
Here are 3 important conditions, which needs to be satisfied before deduction of TDS at higher rates u/s 206AB
1) Time limit for filing tax returns under sub-section (1) of section 139 of the Act has expired for both these assessment years.
2) Aggregate of tax deducted at source in his case is Rs. 50,000 or more in each of these two previous years.
3) Specified person shall not include a non-resident who does not have a permanent establishment in India.
Applicability of section 206AB
Budget 2021, provide for the applicability of the section 206AB w.e.f. 1st July 2021.
Non-applicability of section 206AB
Section 206AB of the Income Tax Act will not be applicable, where the tax is required to be deducted u/s 192, 192A, 194B, 194BB, 194LBC, or 194N of the Act. This implies that a higher rate of TDS shall not be applicable on the following sections where the full amount of TDS is required to be deducted.
TDS on Salary
TDS on Salary to Government Employee
TDS on Lottery
TDS on Horse Riding
TDS on Income in respect of investment in securitization trust
🎯 If the specified person does not submit the PAN (section 206AA) as well as not filed the return (section 206AB), the TDS shall be deducted at the higher rates amongst both the sections.
🎯 The non-resident person who does not have any permanent establishment is excluded from the scope of the specified person.
Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author does not own any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article.
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