SECTION 206AB- SPECIAL PROVISION FOR DEDUCTION OF TAX AT SOURCE FOR NON-FILERS OF INCOME-TAX RETURN

SECTION 206AB- SPECIAL PROVISION FOR DEDUCTION OF TAX AT SOURCE FOR NON-FILERS OF INCOME TAX RETURN
Effective date: 206AB is effective from 1st July 2021

206AB deals with the deduction of tax at a higher rate for specified persons.


RATE:
IF PAN IS SUBMITTED:
  1. At twice the rates specified in the relevant provisions of the act (or)
  2. At twice the rate or rates in force (or)
  3. At the rate of 5%

Whichever is higher

IF PAN IS NOT SUBMITTED:

The tax shall be deducted at higher of the two rates specified in this section and in section 206AA.

206AA:

  1. The rates specified in the relevant provisions of the act (or)
  2. The rate or rates in force (or)
  3. AT the rate of 20%

Whichever is higher

SPECIFIED PERSONS:

Meaning: Specified person means a person who is satisfying all the below-mentioned conditions.

Conditions:

  • A person who has not filed an income tax return for 2 previous years immediately preceding the previous year in which tax is to be deducted.
  • The time limit for filing such a return of income is expired under section 139(1).
  • The aggregate of TDS is 50000/- or more in each of these previous years.

Exception:
Non- Resident who doesn’t have a permanent establishment in India.

Example:
Mr Ajay doesn’t file his Income-tax return before the due date as per section 139 for the following two previous years even if the TDS amount deducted was :

FINANCIAL YEAR                                   TDS AMOUNT
2019-2020                                                      61000/-
2018-2019                                                      54000/-

Considered as a specified person.
Then deductor has to deduct TDS for Mr Ajay as per section 206AB

IF PAN SUBMITTED

1) At twice the rates specified in the relevant provisions of the act (or)
2) At twice the rate or rates in force (or)
3) At the rate of 5%
Whichever is higher

IF PAN NOT SUBMITTED

1) The rates specified in the relevant provisions of the act (or)
2) The rate or rates in force (or)
3) AT the rate of 20%, whichever is higher

Non- Applicability of the Section 206AB

1. If the specified person is a non-resident who does not have a permanent establishment in India.
2. The section has an overriding effect on all provisions of Chapter XVIIB of the Income Tax Act, 1961 except the below-mentioned sections

Table Representing Applicability of Section 206AB

TDS/TCS Provisions – Specified Assesses Identification – As per Circular No. 11/2021 dated 21/06/2021

Section 206AB and 206CCA requiring a higher rate of TDS & TCS are applicable from 1st July 2021 requiring deduction of TDS (other than salary, horse racing, etc) or TCS at twice the normal rates or 5% whichever is higher, in case, deductee or collected are specified persons ie not filed ITRs for 2 years, a total of TDS and TCS is Rs 50,000 or more.

Considering the fact that it is practically impossible for the deduction or collector to identify the specified persons, the new functionality has been issued by CBDT ‘Compliance check for 206AB and 206CCA’.

As per the functionality, Single or multiple searches of PAN can be made to identify the specified persons and bulk data can in fact be downloaded in pdf format.
A list of specified persons would be prepared at the start of the FY and no new specified person would be added during the FY.  If a specified person fulfils the conditions specified above, he would be removed from the list during the FY.

Digital payments up 30.2% in FY21: According to RBI data 

So as a rule, a new specified person list on the portal would be drawn at the start of the FY and no new person would be added during the year even if he becomes a specified person. So we just have to check at the start of the FY for specified persons. Only while adding a new vendor during the year, we might have to look if he is a specified person. Also, if the status of a specified person gets converted into a non-specified person, we might have to update our records.

Important Points

From the perusal of the above section, the following points are to be noted:

  • This punitive rate on the payee will be in addition to the interest, penalty, prosecution and other consequences of non-filing of ROI.
  • Credit will be available to the payees for the higher taxes paid while filing his return of income Interpretation of the threshold condition:
  • To compute a threshold of INR 50,000 or more, both TDS and TCS of respective FY needs to be aggregated. For example I Co is making an FTS payment to Mr A of Rs. 1 Lac on which TDS is required to be deducted u/s. 194J @10%. He had not filed ITR for the last 2 PY and due date u/s. 139(1) has also expired. For each of the last 2 PY, the tax deducted of Mr A was Rs. 20,000 and Rs. 35,000 respectively and TCS collected was Rs. 30,000 and Rs. 40,000 respectively.
  • Aggregate of TDS and TCS in year 1 – 20,000 + 30,000 = 50,000
  • Aggregate of TDS and TCS for year 2 – 35,000 + 40,000 = 75,000
  • The condition of having TDS & TCS of Rs. 50,000 or more in each of the 2 FY is satisfied in the given case.

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Representation for extending dates for furnishing belated/Revised Returns

Representation for extending dates for furnishing belated/Revised Returns

For filing a belated income tax return u/s 139(4) for the fiscal year 2019-20 (which was originally 31st March 2021 but was extended to 31st May 2021)

For the purpose of filing a Revised Return of Income Tax u/s 139(5) for the fiscal year 2019-20 (which was originally 31st March 2021 but was extended to 31st May 2021)

2. However, owing to the Corona pandemic, many taxpayers were unable to file their ITR for FY 2019-20 (First Year 2020-21) by May 31, 2021, despite their best efforts. The provision of such ITRs will aid in increased revenue collection, and taxpayers will be able to maintain regularity by ensuring that their returns are filed on a consistent basis.

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3. The CBDT has granted Corona patients the benefit of exemption for amounts received beginning in FY 2019-20 and ending on June 25, 2021, but the deadline for filing ITR/ Revised ITR has passed, and it is necessary to allow them to file their Return/ Revised ITR for AY 2020-21 so that they can benefit from the exemption.

Section 206AB introduces a higher levy of TDS on tax defaulters from 01st July 2021

4. Facility for filing ITR in response to Notice under Sec. 148: Please provide a facility on the new Income Tax Portal for filing Belated/ Revised ITRs as well as ITR in response to Notice under Sec. 148 for assessment years 2020-21 and earlier, as per amended provisions regarding the reopening of assessments with effect from April 1, 2021.

ITR or Income Tax Return Filing Deadline for FY21 (AY 2021-22) Extended.

ITR or Income Tax Return Filing Deadline for FY21 (AY 2021-22) Extended.

In a major relief to taxpayers, the Central Board of Direct Taxes (CBDT) on Thursday extended the deadline for filing income-tax returns (ITR) for FY 2020-21 till September 30. All you need to know

 

The Central Board of Direct Taxes (CBDT) announced on Thursday that the deadline for filing income tax returns (ITR) for FY 2020-21 (AY 2021-22) has been extended to September 30. The official statement stated, “The Central Board of Direct Taxes, in the exercise of its competence under section 119 of the Income-tax Act, 1961, provides relaxation…” The decision was made in the aftermath of the country’s second coronavirus pandemic. Earlier this year, the Internal Revenue Service (IRS) extended numerous tax deadlines.

“As the second wave of COVID-19 rages through multiple states in India, the extension of due dates for different compliances for employers, as well as the extension of tax filing due dates for taxpayers, is critical in the current circumstances,” stated Archit Gupta, founder and CEO of ClearTax.

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Check out the new tax deadlines for FY 2020-21 (AY 2021-22):

1) For regular taxpayers, the due date for filing an income tax return for Assessment Year 2021-22 has been moved from July 31, 2021 to September 30, 2021.

2) Audited taxpayers have until November 30 to file their income tax returns. The previous date was October 31.

3) The deadline for submitting the Tax Audit Report has been extended from September 30 to October 31, according to a statement from the CBDT.

4) The deadline for filing a late/revised income tax return has been moved from December 31, 2021 to January 31, 2022.



5) The deadline for submitting the Transfer Pricing Study Report has been extended to November 30.

6) The deadline for SFTs has been extended from May 31, 2021 to June 30, 2021.

7) Statement of Reportable Account – the deadline has been extended from May 31 to June 30.

8) The deadline for filing the TDS Statement for the fourth quarter of FY 2020-21 has been extended to June 30. Previously, the deadline for filing TDS was May 31.

9) The deadline for submitting Form 16 has been pushed back a month to July 15. It had been June 15 the day before.

“Various due date extensions will ease compliance burdens for businesses struggling in the current economic downturn. This also underscores the importance of firms moving their tax compliance completely online.”

The Income Tax Department announced on Wednesday that on June 7, it will launch a new e-filing site at http://incometax.gov.in. From June 1 to June 6, the present platform would be unavailable to taxpayers for six days, according to a statement from Income Tax India. “The new e-filing portal is designed to provide taxpayers with ease as well as a modern, seamless experience. It is another step by the CBDT to make compliance easier for its taxpayers and other stakeholders,” it continued.

So far this fiscal year, the tax department has issued over Rs 24,792 crore in refunds to over 15 lakh taxpayers. The Income Tax Department tweeted, “CBDT issues refunds of about Rs 24,792 crore to more than 15 lakh taxpayers between 1st April 2021 and 17th May 2021.” In all, Rs 7,458 crore in personal income tax refunds were issued in approximately 14.98 lakh cases. 43,661 taxpayers received Rs 17,334 crore in corporate tax refunds.