Special Rates for TDS & TCS

Special Rates for TDS & TCS - CA Dinesh R Shah and CA Shreya Doshi, Mumbai

 

Special Rate for TDS and TCS u/s 206AB OR 206CCA on Non-Filer or Late filer of return of income ( i.e.Beyond 139(1))

 

KEY HIGHLIGHTS

 

 1)      Section 206AB and 206CCA applies to situations where tax is deductible under the provision of Chapter XVIIB and XVIIBB except-

 -          Section 192 i.e. salary payable

 -          Section192A i.e. payment of accumulated balance due to employee

 -          Section 194B winning from lottery or cross words

 -          Section 194BB winnings from horse race

 -          Section 194LBC income in respect of investment in securitization trust or

 -          Section 194N: - payment of certain amount in cash.

 

2) Section 206AB and 206CCA prescribe special rate of TDS and TCS respectively on any sum or income or the amount paid or payable or credited by a person to a specified person or any sum or amount received by a person from a specified person.

 

3) Section 206AB and 206CCA come into effect from the 1st day of July 2021.

 

4) 1st condition- Specified Person – Filing of returns u/s 139(1)

 

Here ‘Specified Person’meansa person who has not filed return of income for both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be deducted for which time limit of filing return of income under section 139(1) has expired and the aggregate tax deducted at source (TDS) and collected at source (TCS) in his case is rupees 50,000/- or more in each of these two previous years.

For this purpose, you will have to ask the receiver of such payments whether the return of income for the A.Y. 2019 – 20 & 2020 -21 has been filed on or before the due date of filing the return of income under Section 139(1) of IT Act, 1961

 

No.

Assessment Year

Due dates for non audits

Due dates u/s 139(1) for persons who are liable to Tax Audit u/s 44AB or Statutory Audit

(1)

2020 – 21

10th January, 2021

15th February, 2021

(2)

2019 – 20

31st August, 2019

31st October, 2019


Note :You have not to consider the date of filing return of income for the A.Y. 2021 – 22.

 

5) 2ndcondition- Aggregate of TDS and TCS equal to or more than 50,000

 

Aggregate of Tax deducted at source i.e. TDS and collected at source i.e. TCS of specified person shall be more than 50,000/- in the A.Y. 2019–20 and A.Y. 2020 – 21 (both years).

 

6) If two conditions are fulfilled i.e. Condition no. 1 and 2 mentioned aboveare fulfilled then you do not have to deduct TDS or TCS as given in the respective sections of the Income Tax Act or Rates in Forcebut TDS or TCS shall be done u/s 206AB or 206CCA at the following rates-

 

Such tax shall be deducted at the higher of

(i) Twice the rate specified in the relevant provision of the Act or

(ii) Twice the rate or rate in the force or

(iii) The rate of five percent.

 

Example-

 

Suppose in the FY 2021-22 i.e.starting from 1st April 2021 (wherein the law comes into effect from 1st July 2021) to the year ending on 31stMarch, 2022, you are making the payment say for the following expenses and

-          aggregate of TDS and TCS in the BOTH of the earlier two years has exceeded Rs 50,000 and

-          Return of income were not filed u/s 139(1) for both the earlier two years

 

THEN TDS/ TCS shall be done as per last column of the table mentioned below-

 

Section

TDS Rates as per section (regular)

 

(Column a)

If ITR not filed u/s 139(1) for two years (2x of column no. (a))

 

(Column b)

5% as mentioned in 206AB(1)(iii)

 

(Column c)

Final rate of TDS as per 206AB (higher of  (b) and (c))

Section - 194A : Interest other than "Interest on securities"

10%

20%

5%

20%

Section - 194C : Payments to contractors

1% or 2% as the case may be

2% or 4% as the case may be

5%

5%

Section - 194H : Commission or

Brokerage

 

5%

10%

5%

10%

Section - 194-I : Rent

2% or 10% as the case maybe

4% or 20% as the case maybe

5%

5% or 20% as the case may be

Section - 194J : Fees for professional or technical services

2% or 10% as the case maybe

4% or 20% as the case maybe

5%

5% or 20% as the case may be

 

7)      If the person earning income does not have PAN or Aadhar as prescribed under section 206AA thenTDS shall be the special rate u/s 206AA i.e. higher of the three mentioned below-

i)        Rate specified in the relevant provision of this Act or 

ii)       Rate or rates in force or

iii)     Rate of 20%.

 

8)      Thus, in short, if the specified person has not filed the return in time i.e. within the time limit prescribed u/s 139(1) for the A.Y. 2019 – 20 and the A.Y. 2020 – 21 and aggregate of TDS and TCS in each of theA.Y. 2019 – 20 and the A.Y. 2020 – 21is Rs 50,000 or more then provisions of Section 206AB and 206CCA will be applicable.

 

9)      If the specified person has filed the return in any one of the two years i.e. either in the A.Y. 2019 – 20 or in A.Y. 2020 – 21, the double rate TDS / TCS provisions i.e. Section 206AB and 206CCA will not be applicable. In the similar way, if the specified person’s aggregate TDS and TCS is less than 50,000in any one of the two assessment years i.e. either in the A.Y. 2019 – 2020 and or in A.Y. 2020 – 21 then the double TDS/TCS rate i.e. Section 206AB and 206CCAwill not be applicable.

 

10)  Now how will thepayer who is deducting tax or collecting tax at source will know the position of the specified person(defaulter of return u/s 139(1) in last two years-AY 2019-20 and AY 2020-21) and his amount of TDS/ TCS in earlier two years(AY 2019-20 and AY 2020-21)?

(i)      Deductor/ Collector of TDS or TCS can ask for Income Tax Acknowledgement (ITR V) for AY 2019-20 and AY 2020-21 to check TDS / TCS and date of filing of returns OR

(ii)    Deductor can use income tax portal where the deductor will get the details of the specified person.(See Circular No. 11 of 2021 dated 21st June 2021 - F.No. 370133/7/2021/TPL)

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