CBDT: Functionality under section 206AB and 206CCA of the Income-tax Act, 1961

Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes (TPL Division) vide Income Tax Circular No. 10 of 2022 dated 17th May, 2022 has released “Circular regarding use of functionality under section 206AB and 206CCA of the Income-tax Act, 1961, which were inserted into the act by the Finance Act, 2021.

The deadline to file the original ITR for FY 2020-21 was December 31, 2021. Thus, if a taxpayer failed to file their ITR by this date, higher TDS will be applicable in FY 2022-23. This higher TDS will apply on certain incomes which will be earned during the current financial year by taxpayers who missed filing ITR for FY 2020-21 (AY 2021-22).

  • Applicability date:

Tax deduction at source (TDS) and tax collected at source (TCS) will be levied at a higher rate from such individuals with effect from April 1, 2022.

  • Specified person meant a person who satisfies both the following conditions: –
  1. He has not filed the returns of income for both of the two assessment years relevant to the two previous years immediately before the previous year in which tax is required to be deducted/collected. Two previous years to be counted are required to be those whose return filing date under section 139 (1) has expired.
  2. Aggregate of tax deducted at source and tax collected at source is rupees fifty thousand or more in each of these two previous years.

In Short,

According to the latest rules, higher TDS apply to individuals if they fulfil the following conditions:

  1. ITR not filed for the relevant previous financial year immediately preceding the financial year in which tax has to be deducted/collected and,
  2. Aggregate TDS and TCS exceeds Rs 50,000 in that previous year.
  • Finance Act 2022 has brought about the following changes in the above mentioned provisions, i.e., section 206AB and section 206CCA of the Act with effect from 1st April, 2022:

A higher TDS is not applicable on all incomes that will be earned by an individual during FY 2022-23. These are as follows:

  1. 192: Salaries
  2. 192A: Withdrawal from PF account
  3. 194B: Income by the way of winnings from lottery, Game shows & puzzles etc.
  4. 194BB: Income from winnings from horse race
  5. 194LBC: Income in respect of investment in securitization trust
  6. 194N: Cash withdrawal in a financial year exceeding a specified financial year
  7. 194-IA: Money received from sale of immovable property
  8. 194-IB: Rent paid exceeds Rs 50,000 per month
  9. 194M: Payments of certain sums by Individual & HUFs to resident contractors or professionals.
  10. 194S: TDS on transfer of virtual digital asset (VDA) such as crypto assets etc., provided sales, gross receipts or turnover from the business carried on by him or profession exercised by him does not exceed one crore (in case of business) or Rs 50 lakh (in case of profession). This section is effective from July 1, 2022.
  • As per income tax laws, higher TDS/TCS will be deducted at the rate, highest of the following on specified persons:
  • Twice the rate specified in the relevant provision of the Act; or
  • Twice the rate or rates in force; or
  • The rate of five per cent.

If the specified person files valid ITR (filed & verified) for FY 2021-22 (AY 2022-23), their name would be removed from the list after the expiry of due date of filing ITR or actual date of filing valid ITR, whichever is later. Further, if the aggregate TDS & TCS does not go beyond the Rs 50,000 limit in last financial year, the individual’s name will be cut from the list on July 31, 2022.

Tax deductor will be required to check for those names that are reflected in the specified persons list. This is because these names can be removed from the list. A bank can use the Income-tax department’s ‘Compliance Check for Section 206AB & 206CCA’ to ascertain whether higher TDS is applicable or not.

Disclaimer:  Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information.

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