The Finance bill 2021, proposed to insert a new section 206CCA for deduction of TCS at higher rates for those who have not filed their Income Tax Return. Here are the details of the new section 206CCA of the Income Tax Act, 1961.
Section 206CCA of the Income Tax Act, 1961
Proposed section 206CCA 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“.
Applicability of section 206CCA
Budget 2021, provide for the applicability of section 206CCA w.e.f. 1st July 2021.
Condition for deduction of TCS u/s 206CCA
Here are 3 important conditions, which needs to be satisfied before deduction of TCS at higher rates u/s 206CCA
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 collected 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.
How would be the ITR filing will be checked of the specified person
For this purpose, the government would provide a new utility, wherein a deductor will get the details of specified person ITR filing by entering the PAN no. of that person.
However, as a prudent practice, the assessee should keep a copy of the supplier’s ITR for the preceding two financial years as a confirmation to accordingly collect TCS as per the applicable rates.
Rate of TCS under section 206CCA of the Income Tax Act
The provisions of sub-section (1) of section 206CCA provide for the rate to be applied. The rate of TCS under section 206CCA of the Income Tax Act will be higher of the following-
a) at twice the rate specified in the relevant TCS provision of the act, or
b) at the rate of 5%.
- Circular No. 11/2021 Dated 21st June 2021- Use of functionality under section 206AB and 206CCA of the Income Tax Act, 1961
- Compliance check for section 206AB and section 206CCA
Some other Important points for section 206CCA
- If the specified person does not submit the PAN (section 206CC) as well as not filed the return (section 206CCA), the TCS shall be collected 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.
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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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Compiled by- CA Chirag Agarwal (Practicing Chartered Accountants)