Overview Of Section 206AB And Section 206CCA Of Income Tax Act

By Aakash Kalra    -   August 1, 2021

In this blog, we will analyse two new sections of the Income Tax Act, 1961 inserted vide Finance Act, 2021, these are Section 206AB and section 206CCA. These sections provides for deduction of Tax (TDS)/Collection of Tax(TCS) at a higher rate for certain "Specified Persons".

Section 206 AB deals with Deduction of Tax at higher Rate whereas Section 206CCA deals with the Collection of Tax at Higher Rate in case of payment or receivable is from a  Specified Person.

Effective Date : Section 206AB and Section 206CCA are effective from 1^st July 2021.

Who is a Specified Person?

Person who satisfies the below mention conditions:-

(1)  who has not filed Income Tax Returns (ITR) for 2 previous years immediately preceding the previous year in which tax is required to be deducted/collected

(2) The time limit for filing such return of Income u/s 139(1) has expired.

(3) Aggregate of Tax deducted/collected at source in each of these financial years is Rs. 50,000/- or more

What does the provision state?

As per sub section (1) of section 206AB, where tax is required to be deducted at source on any sum payable or credited by any person to a Specified Person, tax shall be deducted at higher rates of the following given below :-

Rates:

(i) Twice the rates Specified in the relevant provisions of the Act. (ii) Twice the rate or rates in force. (iii) At the rate of 5%.

As per sub section (1) of section 206CCA, where tax is required to be collected at source on any sum receivable or credited by any person from the Specified Person, then tax shall be collected at higher rates of the following given below :-

For Section 206CCA

(i) Twice the rates Specified in the relevant provisions of the Act. (ii) At the rate of 5%.

Further, sub section (2) of section 4206CCA provides that on Non Furnishing of PAN by the Specified Person, section 206AA/206CC shall be applicable in additions to this section and tax shall be collected/deducted at higher of the two rates as provided in sections 206AB and 206CCA.

Non-Applicability of provisions of section 206AB and 206CCA

• Section 206AB/206CCA are not applicable to a non-resident who does not have a permanent establishment in India.
• Section 206AB do not apply to sums falling under following sections of Chapter XVIIB:

(i) Section 192 – Payment of Salary

(ii) Section 192A - Payment of accumulated balance due to an employee

(iii) Section 194B - Winnings from Lottery or Crossword puzzle

(iv) Section 194BB - Winnings from Horse race.

(v) Section 194LBC - Income in respect of Investment in Securitisation trust.

(vi) Payment of certain amount/amounts in Cash.