Section 206AB & 206CCA – ITR Tax Deduction

8 November 2023

1,393 4 mins read

Know everything about section 206AB and 206CA which will help you in tax deduction in the future!

In the Finance Bill, 2021, new sections are introduced. You will have to deduct TDS or correct the TCS at a high rate if you pay any amount to a specific person. Section 206AB & 206CCA for TDS is applicable after section 206 aa of the Income Tax Act. The latter section provides all the reductions for the TDS at a high rate for those who do not give or furnish the permanent account number.

At the same time, section 206 CCA for the CS is applicable after section 206 CC of the Income Tax Act. You must read the detailed guide covering all the recent cbdt circular number 10 2022 and the compliance check functionality.

Table of Contents

The Basics About Section 206 AB and Section 206 CCA

Section 206 AB deducts the tax deducted at source at high rates as compared to usual when you make payment to those who have not filed the income tax return in the previous year. At the same time, the 206 CCA section will collect tax collected at the source at a high rate than usual from the amount received from such buyers.

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The Applicability Of Section 206 ab:

The higher number of TDS should be deducted on any transaction like contract payment professional charges rent, but it will not include the nature of the payment.
Salary section 192
Premature withdrawal of EPF section 192 a
Winning from any lottery or card games, including section 194 b
Winning from the horse race featuring section 194 BB
Income regarding investment in securitization trust featuring section 194 LBC
Cash withdrawal, including section 194N
Non-resident, you do not have any permanent establishment in India.

The union budget also clarifies more transactions on which the TDS cannot be detected highly.

The consideration which is paid for the immovable property is mentioned in section 194 1A
Rent payment made to the landlord which is above INR 50,000mentioned under section 194 I b
Any payment for contractual or professional services made above INR 50,00,000 mentioned under section 194 m
Transfer of any virtual digital asset discussed in section 194 s to the individual or huf whose business turnover is not more than 1,00,00,000 the cross received from the profession is less than INR 50,00,000 during the last financial year or the individual or Hindu undivided family who does not have any income from a professional business.

Who Is It Not Applicable For Section 206 CCA

TCS should not be collected at any high amount from a non-resident who does not have any fixed business place in India for running the business or for those who do not have a permanent establishment in India.

Who Is A Specific Person Mentioned Under Section 206 a b

The particular person is generally the one who has not filed any income tax return for the last financial year, and the Income Tax Return Filing for Non Resident Indian, and the total amount of the tax deducted or collected in the previous year is INR 50,000 or even more.

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It does not apply to any non-resident who does not have a permanent establishment in the country.

The permanent establishment for this purpose mainly includes a fixed place for business where the enterprise’s business runs entirely or partially.

Rate of TDS under section 206 ab or the speed of TCS mentioned under section 80DD

Mentioned Under Section 206 ab

The tax will be deducted add the source at higher of the below is said if the payment is made to a specific person mentioned above. It includes two times the rate given in the Income Tax Act or the Finance Act. It can also be 5%.

Furthermore, nonfiling of the income tax return if the specific person does not offer a PAN card, then the tax will be deducted at 20:00 percent of the rate applicable as per the section given or whatever is more.

TCS is Mentioned Under Section 206 CCA

The tax would be collected at the source on the higher of the following. It will be two times the rate given in the Income Tax Act of the Finance Act mentioned. It can also be 5%. Besides the non-filing of income tax returns, if the specific person does not provide the pan card, then the tax will be deducted at 20:00 percent or rates applicable in the section or whatever is more.

Example

A company, for example, makes a contract payment of INR 80,00,000 to Mr. Anil, and the tax 80c deduction is around 1%. But Mr. Anil fails to find his return for the previous year, and the due date for the filing return has also expired. Hence whenever the company deducts the tax for the financial year 2022 to 2023, they would learn that Mr. Anil has not paid his income tax return for the past year. The TDS should be deducted at 2 percent, twice the rate prescribed in the act or 5%, as the tax should be removed at 5 percent because it is higher. Hence, if Mr. Anil does not provide his pan details, the TDS be deducted at 20%, beyond 5%.

Furthermore, you need to know that Section 206AB & 206CCA apply to non-resident Indian also. But it does not apply to a non-resident taxpayer with no permanent establishment in the country, which means the fixed place in India for running the business wholly or partially.

If you want to know the specific person, you can search through the single pan or the multiple pans by uploading the CSV file.

Conclusion

Hence whenever you are filing the Income tax return, you should always be aware of the different sections under the Income Tax Act: https://incometaxindia.gov.in/pages/acts/income-tax-act.aspx so that you are not making any errors. To know more about Section 206AB & 206CCA – Tax Deduction or Collection at Source For Not Filing of Income Tax Returns, you can reach out to the experts from VakilSearch who can provide constant support for everything.

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