Background
- Budget 2021 had brought about two new sections i.e., section 206AB and 206CCA in the Income Tax Act (the Act) which take effect from July 1, 2021. The sections mandate tax deduction (section 206AB) or tax collection (206CCA) at higher rate in case of non-filers of return of income (specified person) with respect to tax deductions1 and tax collections.
- Higher rate is twice the prescribed rate or 5%, whichever is higher
- Exclusion had been provided for NRs who do not have Permanent Establishments (PE) in India.
- The CBDT recognised the extra compliance burden on the deductor/ collector, who shall now be required to conduct a due diligence satisfying whether the deductee/ collectee is a ‘specified person’.
- Consequently, a new functionality ‘Compliance Check for Sections 206AB and 206CCA’ has been announced, which shall be made available through the reporting portal of the Income Tax Department.
The new functionality
- The tax deductor/ collector can feed the single PAN (PAN search) or multiple PAN (bulk search) of the deductee or collectee and can get a response from the functionality if the deductee/ collectee is a specified person.
Logic of the functionality
- A list of specified persons would be drawn each year at the start of each financial year (FY). For example- at the beginning of FY 2021-22, a fresh list would be prepared with FY 2018-19 and 2019-20 as two relevant FYs. No name would be added to the list of specified persons during the FY and only removal of names would be done on filing of return by the specified person or if his TDS/ TCS is less than the threshold. Belated/ revised TDS/ TCS returns of relevant FYs would also be considered for removing persons from list of specified persons on regular basis.