Two sections necessitate the deduction of tax (TDS) / collection of tax (TCS) at higher rates when payments are made to specified persons who have not filed their income tax returns Two sections necessitate the deduction of tax (TDS) / collection of tax (TCS) at higher rates when payments are made to specified persons who have not filed their income tax returns.
“Specified Person” for this purpose is defined as a person who has not filed the income tax return for the preceding year, the due date of filing of the income tax return for the financial year have expired and the total amount of TDS in last financial year exceeds ₹50,000/-.
The applicable rates of TDS will be the higher of the following:
- at twice the rate specified in the relevant provision of the Act; or
- at twice the rate or rates in force; or
- at the rate of five per cent.
Further, if the specified person does not provide PAN, then tax shall be deducted at 20% or rates applicable as per the section, whichever is higher.
Specified person does not include a non-resident who does not have a permanent establishment in India or a person who is not required to furnish the return of income for the assessment year relevant to the said previous year and is notified by the Central Government in the Official Gazette in this behalf.
Section 206CCA mandates the collection of tax at an elevated rate on any sum, income, or amount received from a “specified person”.
“Specified Person” for this purpose is defined as a person who has not filed the income tax return for the preceding year, the due date of filing of the income tax return for the financial year have expired and the total amount of TDS in last financial year exceeds ₹50,000/-.
The applicable rates of TDS will be the higher of the following:
- at twice the rate specified in the relevant provision of the Act; or
- at the rate of five per cent
Further if the specified person does not provide PAN, then tax shall be deducted at 20% or rates applicable as per the section, whichever is higher.
Specified person does not include a non-resident who does not have a permanent establishment in India or a person who is not required to furnish the return of income for the assessment year relevant to the said previous year and is notified by the Central Government in the Official Gazette in this behalf.
In conclusion, Sections 206AB and 206CCA play a pivotal role in enforcing higher rates of Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) for payments made to specified persons who have not filed their income tax returns. Under Section 206AB, the applicable rates of TDS are at least twice the specified rates or 5%, whichever is higher. Similarly, Section 206CCA mandates the collection of tax at an elevated rate for amounts received from a “Specified Person,” following the same criteria.
