During the Union Budget 2021, the Finance Ministry has introduced a new rule for non-filers to deduct Tax Deduction at Source (TDS) at higher rates. Abhishek Soni, Co-Founder and CEO, Tax2Win said, “In Budget 2021, a new section 206AB was introduced to deduct TDS at a higher rate on matters having fixed nature of income. From July some taxpayers need to pay TDS at higher rates if they fall under a certain category.
Who has to pay TDS at higher rates?
Taxpayers who have not filed income tax return (ITR) in the last two years and the total amount TDS exceeds Rs 50,000 each year, TDS needs to be paid from July at a much higher rate.
new TDS rate
in this rate TDS The Central Board of Direct Taxes (CBDT) said that either twice the rate specified under the relevant section or provision or five per cent, whichever is higher.
How to check whether a taxpayer is required to pay higher TDS or not?
The tax collector or tax deductor can check whether a person is liable to pay TDS at higher rate from this month or not. The Income Tax Regulator has recently unveiled a new functionality “Compliance Check for Sections 206AB and 206CCA” to reduce the burden on tax deductors.
How will this work?
The CBDT noted, “The tax deductor or collector may feed single PAN (PAN search) or multiple PAN (bulk search) of the deductee or collectorate and, if such deductee or collector is a specified person, obtain a response from the functional could.” This functionality is made available through the reporting portal of Income Tax Department, it is further added.
For Single PAN Search, the response will appear on the screen. The tax department will allow the deductors to download the result in PDF format. For bulk search of PAN details, the result will be available as a downloadable file.
How the Income Tax Department is preparing the list of TDS non-filers
The tax department has prepared a list taking the previous years 2018-19 and 2019-20 as the beginning of the financial year 2021-22. The list includes names of taxpayers who had not filed return of income for both assessment years 2019-20 and 2020-21 and had TDS of Rs 50,000 or more in each of these last two years.
A fresh list will be prepared at the beginning of each financial year following all the norms mentioned by the CBDT. The tax department will not add any new names to the list during the financial year 2021-22.
The CBDT said, “The deductor or collector can check the PAN in functionality at the beginning of the financial year and then he is not required to check the PAN of the non-specified person during that financial year.”
Section 206AB will not apply to these transactions
The newly applicable section 206AB will not be applicable for TDS deducted for withdrawal under section 192A from salary or provident fund under section 192. TDS on winnings under section 194B or 194BB by way of card game, crossword, lottery, puzzle or any other game and horse race will not come under the ambit of the new section. It will not be applicable for TDS on income against investment in Securitization Trust u/s 194N and cash withdrawal exceeding Rs.1 crore under section 194N.
This will not be applicable for deducting TDS on lottery under section 194B and horse race under section 194BB. Non-resident Indians, who do not have any permanent establishment in India, will also be exempted.
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