Higher rate of TDS abd TCS Section – 206AB and 206CCA

Finance Act 2021 introduced new Sections 206AB and 206CCA levying a higher TDS / TCS rate applicable from 01st July 2021.

1. Transaction on which sections applicable:-

The nature of the transaction can be any transaction such as contract payments, professional charges, rent etc., but excluding the below nature of payments:

a) Salary
b) Premature withdrawal of EPF
c) Winnings from any lottery or card games or crossword puzzles
d) Income with respect to investment in securitisation trust
e) Winnings from any horse races
f) TDS on cash withdrawals
g) Non-resident not having permanent establishment in India

2. When to deduct or collect higher tax:-

If the transaction is incurred with the person who satisfies the following conditions:

a) The person not file the income tax return for both of the previous two Financial Years (FYs) immediately before the FY in which tax is required to be deducted,

b) where the income tax return filing due date is expired under section 139(1) and

c) The total amount of deduction and collection of tax (TDS and TCS) is Rs.50,000 or more in each of these two previous years.

3. Rate of TDS / TCS:-

Higher of the below-

a) Twice at the rates prescribed in the relevant provisions of the Income Tax Act.

b) At the rate or rates in force, i.e., the rate prescribed in the Finance Act

c) At five per cent.

Note:- If the specified person does not furnish PAN, then tax shall be deducted or collected at 20 per cent or rates applicable as per this section, whichever is higher.

CBDT vide Notification No. 01 of 2021 issued a compliance check functionality for Section 206AB and Section 206CCA of Income Tax Act 1961. Official notification is attached for the refernce.