The Income Tax Department in its circular recently stated that it has come up with a new utility to assist Tax Deducted at Source or TDS and Tax Collected at Source or TCS Collectors. The collectors of TDS or TCS needs to identify "specified persons" who will be levied a higher rate of taxes from July 1. 

The CBDT has issued a circular on 21st June regarding the implementation of new Sections 206AB and 206CCA with regard to higher collection/deduction for some non-filers.

The circular stated as follows:

"CBDT issues Circular No. 11 of 2021 dated 21.06.2021 on implementation of section 206AB & 206CCA wrt higher tax deduction/collection for certain non-filers. New functionality issued for compliance checks for sec 206AB & 206CCA to ease the compliance burden of tax deductors/collectors," the income tax department tweeted.

What is Specified in S. 206AB and 206CCA of the Income Tax Act?

S.206AB specifies TDS or Tax Deducted at Source at higher rates than the amount prescribed in the Act. This is done at the time of making payments/collections to those persons who have failed to file an income tax return.

S.206CCA mentions the collection of TCS or tax collected at source on the amounts that have been received from the buyers at higher rates than as prescribed under the Act.

At What Type of Transactions is S.206AB and 206CCA Applicable?

Any nature of transaction such as professional charges or rent etc having a higher amount, TDS/TCS will be deducted here. Some of the exemptions on S.206AB and S.206CCA are:

• Investment is done in securitization trust
• Salary
• TDS on cash withdrawals
• EPF premature withdrawal
• Any type of winning made from horse races.
• Lottery card or game winning.

When Tax should be Deducted or Collected as per S.206AB and 206CCA?

As per S.206AB and 206CCA the tax must be deducted or collected at higher rates than as specified in the Act. Provided the individual satisfies the below-mentioned points:

• The individual failed to file an income tax return for the previous two financial years immediately prior to the FY in which the tax was to be deducted.
• Where the due date to file an income tax return has expired.
• The total deducted or collected amount is Rs. 50,000 or more in each of the previous two years.

What is the Rate of TDS or TCS as per S.206AB and S.206CCA of the Income Tax Act?

TDS as per S.206AB and S.206CCA

In case the taxpayer falls in any of the conditions mentioned above then the tax must be charged at TDS at more than the below rates:

• Twice at the rates that have been prescribed in the provision of the IT Act.
• As per the rates that have been put in force as per the Finance Act.
• At the rate of 5%.

If a person fails to file an income tax return and also the person does not furnish his PAN card, then the tax shall be collected or deducted at a rate of 20% whichever is higher.

TCS as per S.206AB and 206CCA

The TCS will be collected on higher of the below-mentioned points:

• Twice the rates as specified in S.206AB and 206CCA of the IT Act.
• At the specified rate mentioned in the Finance Act.
• At the rate of five percent.

Also, the non-filing of the income tax return, the specified person does not furnish any PAN, then tax shall be deducted or collected at the rate of 20 percent as or S. 206AB and 206CCAwhichever is higher.

Conclusion

S. 206AB and 206CCA have been inserted by the Finance Bill, 2021. These sections specify provisions for non-filers of the income tax return. S. 206AB and 206CCA are applicable in matters related to non-furnishing of PAN and also to impose higher rates.

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