Tax dept introduces new functionality to identify people on whom higher TDS will be levied from July 1

 








New Delhi: In order to check whether a taxpayer will be eligible to pay Tax Deducted at Source (TDS) at higher rates from July 1, the Income Tax department has introduced a new functionality on the tax portal. The finance ministry introduced a new section 206AB in the Budget 2021 to deduct TDS at higher rates for certain non-filers.

If a taxpayer has not filed TDS in the last two years and aggregate of TDS exceeds Rs 50,000 in each year, the Income Tax department will charge more while filing the income tax returns (ITR) from July 1. The rate of TDS will be either twice the rate specified under the relevant section or provision or five per cent, whichever is higher.

Under Section 206AB of the Income Tax Act 1961, the new TDS rate levied would be the highest of:
Double the rate specified in the relevant provision of the Income Tax Act; or
Double the rate of rates in force; or
At the rate of five per cent.

For TCS collection, the rate under section 206CCA of the Act will be higher of: Double the rate specified in the relevant section; or 5 per cent.

TDS on interest income from fixed deposit is deducted at the rate of 10% (provided PAN is given to the bank). Now if the above-mentioned conditions are satisfied, then new TDS rate will be higher of the following:
Twice the rate specified in the relevant section, i.e., 20% (10% X 2));
Twice the rate or rate in force 20% (10 X 2); or
5%

The highest rate is 20%. This rate is same as in the case when PAN is not given to the bank. Thus, this will be applicable to interest income from fixed deposit if ITR is not filed for both previous two financial years and TDS in each financial year exceeds Rs 50,000.

New rule won’t be applicable in these cases:

The newly implemented Section 206AB will not be applicable for TDS deducted under Section 192 for salary or withdrawal from Provident Funds under Section 192A. TDS on winning from the card game, crossword, lottery, puzzle or any other games and horse race under Section 194B or 194BB will not come under the purview of new section. It will not be applicable for TDS on cash withdrawal over Rs 1 crore under Section 194N and income against investment in the securitisation trust under Section 194LBC.

Now, the tax collector or tax deductor has to check whether a person is eligible to pay TDS at a higher rate from July. “This can lead to extra compliance burden on such tax deductor or tax collector," the Central Board of Direct Taxes (CBDT) said in a statement.

To ease the burden, the regulator has issued a new functionality “Compliance check for Sections 206AB & 206CCA". “The tax deductor or the collector can feed the single PAN (PAN search) or multiple PANs (bulk search) of the deductee or collectee and can get a response from the functionality if such deductee or collectee is a specified person," the CBDT mentioned. This functionality is made available through reporting portal of the Income-tax department, it further added.

For single PAN Search, the response will be visible on the screen. The tax department will allow the deductors to download the result in the PDF format. For bulk search of PAN details, the result will be available as downloadable file. Through the functionality, the TDS deductor or TCS collector can feed PAN of the deductee or collectee on the functionality and get to know whether the deductee or collectee is a 'specified person'.

The income tax department has prepared a list of 'specified persons' in the beginning of financial year 2021-22, taking 2018-19 and 2019-20 as the two relevant previous years. The list contains names of taxpayers who did not file return of income for both assessment years 2019-20 and 2020-21 and have aggregate TDS and TCS of Rs 50,000 or more in each of these two previous years.



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