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CBDT Issues Circular on New Functionality to Check Return Filing Status for Compliance of Sections 206AB & 206CCA
The Apex Body CBDT has issued Circular No. 11 of 2021 bearing F. No. 370133/7/2021-TPL, dated 21.6.2021, regarding Use of Functionality u/s 206AB and 206CCA of the Income Tax Act. The said Circular is enclosed as per PDF file enclosed below.
The Finance Act 2021 has inserted two new sections viz. section 206AB mandating deduction of tax at source and section 206CCA, mandating collection of tax at source, at higher rate of double the applicable rate or 5%, whichever is higher, in case of "specified persons".
Section 206AB(3) applicable w.e.f. 1.7.2021, stipultaes the following conditions to classify a recipient as 'specified person':
(a) He has not filed the return of income for 2 assessment years relevant to the previous years immediately prior to the previous year in which tax is required to be deducted;
(b) The due date to file such return of income, as prescribed under Section 139(1), has expired; and
(c) The aggregate amount of tax deducted and collected at source is Rs. 50,000 or more in each of these 2 previous years.
This provision is applicable from 01-07-2021 and any payment after this date shall be subject to the test of Section 206AB.
Which years are relevant for FY 2021-22 based on the definition of “Specified person”?
Reading of the definition of “Specified person” in Section 206AB gives an impression that the relevant Previous Years (‘PYs’) to be considered for this purpose are those years which are immediately preceding the subject Previous Year (‘PY’) for which the due date of filing income-tax return under Section 139(1) has expired.
Based on the above, as of 1 July 2021, the time limit for filing Income-tax return under section 139(1) is expired for FY 2018-19 and FY 2019-20 in case of all the types of taxpayers and as such the due date for FY 2020-21 is not expired. Therefore, these two PYs i.e. FY 2018-19 and FY 2019-20 are relevant PYs for checking the applicability of Section 206AB as of 1 July 2021.
However, once the time limit for filing the Income-tax return expires for Financial Year (FY) 2020-21, the relevant PYs would be FY 2019-20 and FY 2020-21.
However, where both the provision of this section and Section 206AA are applicable, that is, the deductee has neither furnished his PAN to the deductor nor has he furnished his return of income for the specified periods, the tax shall be deducted at the rates provided in this section or in section 206AA, whichever is higher.
Section 206AA v. Section 206AB
|
Basis of distinction |
Section 206AA |
Section 206AB |
|
Applicability |
When a deductee fails to furnish his PAN |
When a deductee fails to furnish a return for the specified period and the aggregate amount of tax deducted or collected during such specified period exceeds the specified limit |
|
Rate for deduction |
Higher of: ■ Rate specified in the relevant provision; ■ Rate or rates in force; or ■ 20%. |
Higher of: ■ Twice the rate specified in the relevant provision; ■ Twice the rate or rates in force; ■ 5%. |
|
Exception |
In respect of the following income received by a non-resident (or a foreign company): (a) Interest on bonds referred under Section 194LC; (b) Specified payments as referred under Rule 37BC; and (c) Income in respect of investment in Category I or Category II AIFs as referred under Rule 114AAB. |
In respect of sum/income on which tax is required to be deducted under any of the following provision: (a) Section 192 (b) Section 192A (c) Section 194B (d) Section 194BB (e) Section 194LBC (f) Section 194N Further, this provision does not apply if the non-resident is not having any PE in India |
|
Special tax rates |
5% tax rate to apply if the tax is deductible under Section 194-O and Section 194Q. If tax is deductible under Section 192A, the rate of TDS shall be the maximum marginal rate. |
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Non-obstante clause
The provisions of Section 206AB overrides all other provisions of the Income-tax Act. It will apply even if the assessee has lower or nil TDS certificate or he has filed a declaration under Section 197A for non-deduction of tax or he is otherwise not liable to file the return of income. However, this provision will be attracted only if the tax is otherwise deductible under Chapter XVII-B.
Which sum or income is liable for a higher rate of TDS?
This provision shall apply in respect of every sum or income or amount from which tax is deductible under any provision of Chapter XVII-B except those specified under Section 206AB, namely:
(a) Section 192: TDS on Salary;
(b) Section 192A: TDS on withdrawal from EPF;
(c) Section 194B: TDS on winning from lotteries, crossword puzzles, etc.
(d) Section 194BB: TDS on winning from racehorses;
(e) Section 194LBC: TDS on income in respect of investment in Securitization Trust;
(f) Section 194N: TDS on cash withdrawal.
SECTION 206CCA inserted by the Finance Act 2021 w.e.f. 1.7.2021, also requires the collector to collect the tax at a higher rate if the return is not filed by the collectee for the specified period. Thus, where tax is required to be collected under this provision on any sum (or amount), the tax shall be collected at the higher of following rates:
(a) Twice the rate specified in the relevant provision of the Act; or
(b) 5%.
However, where both the provision of this section and Section 206CC are applicable, the tax shall be collected at rates provided in this section or in section 206CC, whichever is higher.
Section 206CC v. Section 206CCA
|
Basis of distinction |
Section 206CC |
Section 206CCA |
|
Applicability |
When collectee fails to furnish his PAN |
When collectee fails to furnish the return of income for the specified period and the aggregate amount of tax deducted or collected during such specified period exceeds the specified limit |
|
Rate for deduction |
Higher of: ■ Twice the rate specified in Section 206C; ■ 5%. |
Higher of: ■ Twice the rate specified in section 206C ■ 5% |
|
Exception |
If the non-resident does not have a PE in India |
If the non-resident does not have a PE in India |
|
Special tax rates |
The tax shall be collected at the rate of 1% if tax is collectable under Section 206C(1H). |
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In order to enable the deductor to ascertain the return filing compliance status of the "specified person", as explained above, the CBDT has come up with a new Functionality the modus operandi of which is explained in this CBDT Circular No. 11 of 2021 dated 21.6.2021, which is enclosed as per PDF file below for ready reference of our Readers.
