CBDT issues Circular regarding use of functionality under Section 206AB and 206CCA of the Income-tax Act, 1961
CBDT issued a circular regarding the use of functionality under Section 206AB and 206CCA of the Income-tax Act, 1961. Two new sections are introduced, Section 206AB (Tax Deduction) and 206CCA (Tax Collection). By the introduction of this new functionality, the compliance of the Tax Deduction u/s 206AB and Tax Collection u/s 206CCA at a higher rate from certain non-filers will be ensured. These provisions shall come into effect from 1st July 2021. Read the full Circular here:
Circular No. 11 of 2021
F. No. 3701331712021-TPL
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
Dated: 21st June 2021
Sub.: Circular regarding use of functionality under Section 206AB and 206CCA of the Income-tax Act, 1961- reg.
Finance Act, 2021 inserted two new sections 206AB and 206CCA in the Income-tax Act 1961 (hereinafter referred to as “the Act”) which takes effect from the 1st day of July 2021. These sections mandate tax deduction (section 206AB) or tax collection (section 206CCA) at higher rate in case of certain non-filers (specified persons) with respect to tax deductions (other than under sections 192, 192A, 194B, 194BB, I 94LBC and I 94N) and tax collections. The higher rate is twice the prescribed rate or 5%, whichever is higher. A specified person means a person who satisfies both the following conditions: –
(i) 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 sub-section (1) of section 139 has expired.
Income Tax Informants Rewards Scheme, 2018: CBDT
(ii) Aggregate of tax deducted at source and tax collected at source is rupees fifty thousand or more in each of these two previous years.
2. It can be seen that the tax deductor or the tax collector is required to do due diligence of satisfying himself if the deductee or the collectee is a specified person. This can lead to an extra compliance burden on such tax deductor or a tax collector. To ease this compliance burden the Central Board of Direct Taxes is issuing a new functionality “Compliance Check for Sections 206AB & 206CCA”. This functionality is made available through reporting portal of the Income-tax Department. The tax deductor or the collector can feed the single PAN (PAN search) or multiple PANs (bulk search) of the deductee or coIIectee and can get a response from the functionality if such deductee or collectee is a specified person. For PAN Search, a response will be visible on the screen which can be downloaded in the PDF format. For Bulk Search, response would be in the Conn of downloadable file which can be kept for record.
Faceless Assessment and Appeal
3. The logic of the functionality is as under:
• A list of specified persons is prepared as of the start of the financial year 2021-22, taking previous years 2018-19 and 2019-20 as the two relevant previous years. List contains the name of taxpayers who did not file a return of income for both assessments years 2019-20 and 2020-21 and have an aggregate of TDS and TCS of fifty thousand rupees or more in each of these two previous years.
• During the financial year 2021-22, no new names are added To the list of specified persons. This is a taxpayer-friendly measure to reduce the burden on tax deductor a collector of checking PANs of non-specified person more than once during the financial year.
• If any specified person files a valid return of income (filed & verified) for the assessment year 2019-20 or 2020-21 during the financial year 2021-22, his name would be removed from the list of specified persons. This would be done on the date of filing of the valid return of income during the financial year 2021-22.
• If any specified person files a valid return of income (filed & verified) for the assessment year 2021-22, his name would be removed from the list of specified persons. This will be done on the due date of filing of return of income for A. Y. 2021-22 or the date of actual filing of valid return( filed & verified) whichever is later.
Issuance of notice u/s 131 (1A) of the Income Tax Act 1961
• If the aggregate of TDS and TCS, in the case of a specified person, in the previous year 2020-21, is less than fifty thousand rupees, his name would be removed from the list of specified persons. This would be done on the first due date under sub-section (I) of section 139 of the Act falling in the financial year 2021-22. For the financial year 2021-22 this due date of 3Ist July 2021 has been extended to 30th Sept 2021.
• Belated and revised TCS & TDS returns of the relevant financial years filed during the financial year 2021-22 would also be considered for removing persons from the list of specified persons on a regular basis.
4. The deductor or the collector may check the PAN in the functionality at the beginning of the financial year and then he is not required to check the PAN of a non-specified person during that financial year. To illustrate, let us assume that a deductor has 10,000 vendors that he deals with. He can use the functionality in the bulk search mode and can get the result of all these 10,000 PANs in one go. Let us assume that the functionality has shown that out of these 10,000 PANs, 5 PANs arc specified persons for the purposes of sections 206AB and 206CCA of the Act. Now with respect to the remaining 9,995 PAN, it is clear that they are not on the list of specified persons for that financial year. Since no new name would be added to the list of specified persons during the financial year, the deductor or collector can be assured that these 9,995 PANs would remain outside the list of specified persons during that financial year. Thus, deduct or collector need not check again with respect to these 9,995 PANs during that financial year. There are chances that the 5 PANs which arc of specified persons may move out of the list during the financial year and for that there will be a need to recheck at the time of making tax deduction or tax collection.
5. The list would be drawn afresh at the start of each financial year and the above process would have to be repeated. For example, at the beginning of the financial year 2022- 23 a fresh list would be prepared with previous years 2019-20 and 2020-21 as the two relevant previous years. Then, no name would be added to the list of specified persons during the financial year and the only name would be removed based on the logic given in the 3,d to 6th bullets of paragraph 3 above.
6. It may be noted that as per the provisos of sections 206AB & 206CCA of the Act, the specified persons shall not include a non-resident who does not have a permanent establishment in India. Tax deductors & collectors are expected to carry out necessary due diligence in respect of a specified person established by the above-referred functionality to consider him as non-specified if he falls under these provisions.