As per the new rules, a higher TDS will be imposed for those who have not deposited income tax return (ITR) for the last two years under certain conditions.
The Finance Act 2021 has amended rules relating to tax deducted at source (TDS), which will come into effect from July 1. Under the new guidelines, people who have not deposited income tax returns (ITR) for the previous two years will be subject to a higher TDS.
Finance Act, 2021 has inserted two new sections 206AB and 206CCA which mandates tax deduction (206AB) or tax collection (206CCA) at a higher rate in the case of specified persons with respect to tax deductions (other than under sections 192, 192A, 194B, 194BB, 194LBC, and 194N) and tax collections.
According to Kapil Rana, Founder & Chairman, HostBooks Ltd, a higher rate is twice the prescribed rate or five percent whichever is higher.
“For these sections, specified person means a person who has not filed the return of income for two years in which tax is required to be deducted, for which the time limit of filing return under section 139(1) has expired, and his/her aggregate of tax deducted at source is Rs 50,000 or more in each of these two previous years.”
Simply put, if a TDS of Rs 50,000 or more has been made for the past two years but no return of income has been filed, the rate of TDS will be double the specified rate or five percent, whichever is higher.
However, this provision will not be applicable for the transactions where the full amount of tax is required to be deducted, e.g. salary income, payment to a non-resident, lottery, etc. Also, the specified persons will not include a non-resident who does not have a permanent establishment in India.
Additionally, the Finance Act has introduced Section 194Q, which mandates that any person, being a buyer responsible for paying any sum to any seller (being a resident) for purchase of any goods (including capital goods), where the value of such goods, exceeds Rs 50 lakh in any previous year, will be required to pay TDS at the rate of 0.1 percent. In case of non-furnishing of PAN/Aadhaar by deductee, TDS will be charged at the usual rate or five percent whichever is higher.
These new TDS rules will impact the cash flows of non-filers of the income tax return.
To check such non-filers, according to Ashok Shah, Partner, NA Shah Associates, CBDT has introduced a new tool “Compliance Check for Section 206AB & 206CCA” to ease the compliance burden of the tax deductor.
Under this tool, Shah said that the deductor can feed the PAN of the deductee on the reporting portal and verify whether any deductee is compliant as per section 206AB of the Act and also whether the individual deductee has linked his/her Aadhar with PAN or not.
The response will be visible on the screen for a PAN search, which can be downloaded in PDF format. For bulk search, the response would be in the form of a downloaded file which can be kept for record.
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First Published: IST