During Union Budget 2021, the finance ministry has introduced a new rule to deduct Tax Deducted At Source (TDS) at higher rates for non-filers. “In Budget 2021, a new Section 206AB was introduced to deduct TDS at a higher rate on cases with certain nature of income," said Abhishek Soni, co-founder and chief executive officer, Tax2win. Starting from July, some taxpayers need to pay TDS at higher rates if they come under a certain category.
Who has to Pay TDS at Higher Rates?
Those taxpayers who have not filed income tax return (ITR) in the last two years and the total amount TDS exceeds Rs 50,000 in each year, need to pay TDS at a much higher rate from July.
New TDS Rate
The rate of TDS will be either twice the rate specified under the relevant section or provision or five per cent, whichever is higher, the Central Board of Direct Taxes (CBDT) said.
How to Check if a Taxpayer Needs 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. The income tax regulator has recently unveiled a new functionality “Compliance check for Sections 206AB & 206CCA" to ease the burden on the tax deductors.
How will it Work?
“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.
How Income Tax Department is Making a List of TDS Non-Filers
The tax department has prepared a list as on the start of the financial year 2021-22, taking previous years 2018-19 and 2019-20 previous years. The list contains name of taxpayers who did not file return of income for both assessment years 2019-20 and 2020-21 and have aggregate of TDS of Rs 50,000 or more in each of these two previous years.
A fresh list will be prepared at the start of each financial year following all the norms mentioned by CBDT. The tax department will not add any new names in the list during the financial year 2021-22.
“The deductor or the collector may check the PAN in the functionality at the beginning of the financial year and then he is not required to check the PAN of non-specified person during that financial year," said CBDT.
Section 206AB will not be Applicable for these Transactions
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.
It will not be applicable for deducting TDS on lottery under Section 194B and horse race under Section 194BB. The Non Resident Indians, who do not have any permanent establishment in India, will also be exempted.