Section 206AB-TDS/TCS on non filer at higher rates
Presently with introduction of new section, the purchaser/Seller should be additional care regarding TDS/TCS rates, as another Section 206AB enables to deduct/collect TDS/TCS at higher rates in the event that the purchaser/seller(as the case might be).
The new TDS rate in this part is higher of the followings rates:-
- Double the rate indicated in the applicable section of the Act; or
- Double the rate or rates in applicable; or
- The rate of 5 (five) percent
New Provision 206AB of the Act would apply on any whole or earn or sum paid, or payable or credited, by an individual (in this alluded to as deductee) to a "Specified individual".
“Specified person” has been defined as a person who has not filed the returns of income for both of the 2 Assessment Years relevant to the 2 Previous Years which are immediately before the Previous year in which tax is required to be deducted or collected, as the case may be
More conditions which should be checked are:
1) Time limit for tax return form under provision (1) of Section 139 of the Act has lapsed for both these years.
2) Aggregate of Tax deducted at source and Tax gathered at source for his situation is Rs.50,000 or more in every one of these two earlier years.
3) Specified individual will exclude a non-occupant who doesn't have a lasting foundation in India.
Additionally this part will not matter where the expense is needed to be deducted under segments 192, 192A, 194B, 194BB, 194LBC or 194N of the Act. This infers that a higher pace of TDS will not be pertinent on the accompanying segments where full measure of expense is needed to be deducted:
192: TDS on Salary
192A: TDS on Salary to Government workers
194B: TDS on Lottery
194BB: TDS on Horse Riding
194LBC: TDS on Income in regard of Investment in Securitization Trust
194N: TDS on Cash Withdrawal more than 1 crore.
How might the ITR Filing be checked (for appropriateness of Section 206AB)?
The Government would give another utility on it is Income Tax Software wherein a deductor/Collector, on entering the PAN of the purchaser/vender, would get the subtleties of his ITR Filing.
Be that as it may, as a reasonable practice the assesse should keep a duplicate of the provider's ITR for the previous two Financial Years as an affirmation to appropriately deduct/gather TDS/TCS according to the relevant rate.
This arrangement may be an extra weight on the citizen, anyway it is an extra advance taken by the Government to get individuals who don't record their ITRs in any event, when their assessment has been deducted/gathered and is appeared in 26AS.
More compliance burden on Taxpayer
This may more compliance burden of all the taxpayers, to collect necessary documents from their sellers, regarding ITR filed by them for Previous years. Many Sellers may not even wish to give details of their ITR with their purchases. In such a case, either the Seller will have to suffer higher TDS or commercially the cost of TDS may need to be taken by the purchaser. Thus, practically, the new section will certainly grow the compliance burden for the taxpayers. It may be notice that NRI, not having a permanent establishment in India are spared from this Section and therefore, NRIs having no presence in India but entitled to receive non-salary income from India may not be affected by this Section.The intention of the govt. appears to be in making purchasers themselves force their sellers to comply with income tax provisions and file their Income Tax return and its decided to more income tax compliance. However, it may create a compliance burden for taxpayers having a more number of sellers, to whom such Section would apply. We will need to wait and watch how industry reacts to this Section and complies of this section.
This Provision will be applicable from 1st July, 2021.
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