The Finance Act, 2021 has inserted two new sections i.e., 206AB and 206CCA in the Income-tax Act 1961 which takes effect from 1st day of July, 2021. These sections mandate tax deduction (section 206AB) or tax collection (section 206CCA) at a higher rate in case of certain non-filers (specified persons) with respect to tax deductions (other than under sections 192, 192A, 194B, 194BB, I 94LBC and I 94N) and tax collections. Higher rate is twice the prescribed rate or 5%, whichever is higher. These provisions however have the following exceptions:
A Specified person means a person who has not filled the Income tax returns for preceding Two Financial years immediately before the previous year in which tax is required to be deducted /collected. Two previous years to be counted are required to be those whose return filing date under sub-section (1) of section 139 has expired and whose Aggregate of tax deducted at source and tax collected at source is rupees fifty thousand or more in each of these two previous years.
To ease the burden on the tax deductor or tax collector, of determining whether he is a specified person, the Income Tax Department has implemented a new “Compliance Check Functionality tab for Section 206AB and 206CCA” so as to assist the TDS and TCS taxpayers in following the compliance requirements of these sections.
This newly introduced tab will reduce the burden of compliance over the concerned parties and increase the efficiency in filing returns of the persons who have not filled the same for past two years.
The tax deductor/collector must enter a single Permanent Account Number (PAN search) or several PANs (bulk search) of the deductee/coIIectee to identify the specified person.
This mode will enable to search the PAN of the persons in a quick fashion. The results of the PAN search will be displayed on the screen and can be downloaded in PDF format. The response for a bulk PAN search will be in the form of a downloaded file that may be saved for future reference.
To alleviate the effort of verifying PANs again, the IT department has provided that PAN(s) which are previously checked in the financial year and designated as non-specified do not need to be re-checked.
Once the list of specified persons has been prepared in the beginning of financial year then any addition of names to such list shall not be allowed. Though there may be a chance that a specified person may move out from the list in the year at any time. Hence rechecking must be conducted while deductions and collections of such specified persons.
Tax payment acts as an instrument of economic policy and we being citizen of Country are bound to pay the tax for the effective democratic governance. The amount of tax affects the total volume of production, consumption, investment, choice of industrial location and techniques, balance of payments, distribution of income, and governance of the country. Hence, the introduction of new sections 206AB and 20CCA, as discussed hereinabove will definitely help to track down the individuals who are not filing their income tax returns; And also will able to penalize them at higher rate. This new tab will definitely increase the efficiency of the Income tax Department in regard to tracking the people not filing an Income tax return just at one click.