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FAQ’s on section 206AB and 206CCA on TDS

 

Section 206AB and 206CCA are inserted in the income tax Act. These sections belong to TDS. Some more taxpayers will fall under the TDS provisions. It is introduced to increase tax compliance. Many taxpayers skip filing their ITR’s. This provision will prompt them to file it on time. There is a lot of confusion regarding these sections. Here we have drafted some FAQs to resolve all those confusions.

Q.1 Who will be covered by sections 206AB and 206CCA?

Ans- “Specified person” is covered under these sections. The person making payment to a specified person is required to deduct the TDS at double or specified rates.

Q.2 Who is the specified person under sections 206AB and 206CCA?

Ans- The specified person covered by sections 206AB and 206CCA is who fulfills all of the following conditions.

  • Return of immediately preceding two years is not filed.
  • The due date for filing the income tax return lapses.
  • The tax deduction or collection in both years is more than Rs. 50,000.

Q.3 What will be the rate of deduction of tax in the case of section 206AB and 206CCA?

The rate for deduction of tax is higher of the following-

  • Double of the applicable TDS rate as per the relevant provision
  • Double of the rate in force
  • 5%

e.g- In the case of TDS on rent, the rate is 10%. The rate for section 206AB is- 20% or 5% whichever is higher. In this case, the higher rate is 20%.

e.g.- In the case of a contract, the TDS rate is 1%. In this case, the higher rate is 5%. Thus in this case the TDS rate will be 5%.

In the case of 206CCA, the rate will be twice the rate of TCS.

Q.4 Who is exempted from TDS u/s 206AB?

Following are exempted from the applicability of these sections-

  • Payment made for salary u/s 192,
  • Premature withdrawal of EPF 192A,
  • Winnings from lottery 194B,
  • TDS on winnings from horse race 194BB
  • Payment by securitization trust 194LBC
  • TDS on withdrawal of case above a specified limit194N

Q.5 How to check the compliance of return filing by the recipient?

Section 206AB casts a responsibility on the deductor. But it is difficult for them to check the return filing compliance. Thus a notification is issued in this regard. Soon a utility will be provided to the deductors to check the applicability of this section.

In this utility deductor or collector can enter a PAN. Then the utility will show the applicability of section 206AB and 206CCA on that PAN. Bulk PAN’s can also be uploaded. The utility will generate a report in PDF format. You can download that PDF. The deductor/collector can keep it in the record for FY. The utility is available on the income tax portal.

Worried about your 206AB and CCA compliances. Write us at info@consultease.com

Read the Circular here

Profile photo of CA Shafaly Girdharwal CA Shafaly Girdharwal

CA

New Delhi, India

CA Shaifaly Girdharwal is a GST consultant, Author, Trainer and a famous You tuber. She has taken many seminars on various topics of GST. She is Partner at Ashu Dalmia & Associates and heading the Indirect Tax department. She has authored a book on GST published by Taxmann.

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