Analysis of section 206AB and 206CCA

Analysis of section 206AB and 206CCA

Section 206AB and section 206CCA are newly inserted sections in the Income Tax Act, 1961. Both the sections are effective from 1st July, 2021. These two sections are special provisions that mandate tax deduction or collection at a higher rate for non-filing of returns in the previous two financial years.

Why CBDT inserted section 206AB and 206CCA?

Section 206AB is exclusively dealing with TDS (Tax Deducted at Source) in case of higher rates and section 206CCA deals with TCS (Tax Collected at Source) at a higher rate. Section 206AB and 206CCA have an overriding effect on any other provision/ section contrary to this under the Income Tax Act, 1961.

What is sub-section (1) of Section 206AB/206CCA?

Sub-section (1) of Section 206AB/206CCA states that, where tax is required to be deducted/collected at source on any sum or income or amount paid/received or payable or credited by any person to/from the specified person, then Tax shall be deducted/collected at the higher of the following rates:


For Section 206AB

For Section 206CCA
   
(i) At twice the rates specified in the relevant provisions of the act   
   
(i) At twice the rates specified in the relevant provisions of the act   
   
(ii) At twice the rate or rates in force   
   
(ii) At the rate of 5%   
   
(iii) At the rate of 5%   

What is Sub-section (2) of Section 206AB/206CCA?

Further, Sub-section (2) of Section 206AB/206CCA provides that on Non-furnishing of PAN by the specified person, Section 206AA/206CC shall be applicable in addition to this section respectively.

tax shall be deducted/collected at higher of two rates provided in Section 206AB/206CCA and in Section 206AA/206CC.

Specified Person

Under section 206AB and 206CCA The higher rate is applied for certain notified taxpayers referred to as “Specified Persons”.

Who are ‘Specified Persons’?

A specified person refers to a person who satisfies the following conditions: -

Condition 1 – Person has not filed their Income Tax Return for two previous years immediately preceding the previous year in which tax is required to be deducted/collected

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

Condition 3 – Aggregate of Tax deducted/collected at source in each of these two financial years is INR 50,000/- or more

Therefore, For FY 2021-22 effective from 1st July 2021, specified person shall mean those persons who have not filed their Income Tax Return for both the FY 2018-19 & FY 2019-20 and whose total tax deducted/collected during each of FY 2018-19 & FY 2019-20 were INR 50,000/- or more.

Non-Applicability/Exemptions under Section 206AB/206CCA

Both Section 206AB/206CCA are not applicable to a non-resident who does not have a permanent establishment in India.

Further, the provisions of section 206AB do not apply for any sum or income or amount paid or payable or credited on which tax is otherwise deducted at source under below-mentioned provision of Chapter XVIIB:

  • Section 192 – Salary
  • Section 192A – Payment of accumulated balance due to an employee
  • Section 194B – Winnings from lottery or crossword puzzle
  • Section 194BB – Winning from a horse race
  • Section 194LBC – Income in respect of investment in securitization trust
  • Section 194N – Payments of certain amount/amounts in cash
Show Comments