Direct Tax Alert

Higher rate of TDS and TCS for the non-filers of income-tax return

June 17, 2021

As per sections 206AB and 206CCA of Income tax act (Act), every person liable to deduct or collect tax at source has to collect information from the deductee or payee that if in his case amount of TDS or TCS under section 194Q and 206C (1H) of Act respectively in last two previous years has been INR 50,000/- or more, whether he has filed returns of income for those assessment years.

In case returns have not been filed for those assessment years rate of TDS or TCS will be higher of the following rates:

  • Twice the rate as specified in the tax law, or
  • Twice the rate or rates in force, or
  • Rate of 5 percent.

However, every person shall not include a non-resident who does not have a permanent establishment in India.

Further, section 206AB of the Act shall not apply where the tax is required to be deducted under following sections as given below:

Section  Details
192 TDS on Salary
192A TDS on Premature withdrawal from EPF
194B TDS on Lottery
194BB TDS on Horse Riding
194LBC TDS on Income in respect of investment in securitization trust
194N TDS on cash withdrawal in excess of  Rs. 1 crore

Section 206AA and 206CC of the Act are cognate sections which provide for higher rates of TDS and TCS in case the deductee does not furnish Permanent Account Number (PAN).

In view of the same, if the specified person as per Section 206AB does not have a PAN, the amount of TDS shall be higher of the rates prescribed in Section 206AA and 206AB and if the specified person as per Section 206CCA does not have a PAN, the amount of TCS shall be higher of the rates prescribed in Section 206CC and 206CCA.

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

Last updated: 17/06/2021

Article contributed by:

Himanshu Suryan 

Manager - Direct Tax

MBG Corporate Services

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