• By ADMIN
• Posted 11 Jun, 2021
• 3849
• 1

Higher rate of TDS & TCS w.e.f 1st July, 2021 [Sec 206AB & 206CCA]

Deduction of tax at source for non-filers of income-tax return (Sec 206AB)

If you are deducting tax at source (TDS) for a person for past two years or more is required to consider the following checkpoints to continue with existing rate of TDS otherwise higher rate of TDS is required to be deducted for current year w.e.f 1st July, 2021:-

If,

1. The tax deducted & collected at source for past two previous years are more than or equal to Rs.50,000 for each year; and

2. The return of income for those two years has not been filed & the due date for filing such ITR is also expired on the date of deduction.

(Income-tax Department has provided a link to check the ITR filing status based on efiling Acknowledgement no)

Then,

Higher of the following rates to be considered: -

1. Twice the rate of TDS as per relevant section (194C,194J etc)

2. Twice the rates or rates in force (for specified sections)

3. At the rate of 5%

When PAN of the party is not provided than 20% or the above arrived rate whichever is higher to be adopted.

The above higher rate of TDS is not applicable to the following cases

1. Non-resident who does not have a permanent establishment in India

2. No TDS or TCS is deducted/ collected for the past years but it is being done in current year

3. Sec 192 - TDS on Salary

4. Sec 192A - Payment of accumulated balance due to an employee

5. Sec 192B - Winning from lottery or crossword puzzle

6. 192BB - Winning from horse race

7. Sec 194LBC - Income in respect of investment in securitization trust

8. Sec 194N - Payment of certain amounts in cash

Collection of tax at source for non-filers of income-tax return (Sec 206CCA)

If you are collecting tax at source (TCS) for a person for past two years or more is required to consider the following checkpoints to continue with existing rate of TCS otherwise higher rate of TCS is required to be collected for current year w.e.f 1st July, 2021:-

If,

1. The tax deducted & collected at source for past two previous years are more than or equal to Rs.50,000 for each year; and

2. The return of income for those two years has not been filed & the due date for filing such ITR is also expired on the date of collection.

Then,

Higher of the following rates to be considered: -

1. Twice the rate of TCS as per relevant section

2. At the rate of 5%

The above higher rate of TDS is not applicable to the following cases

1. Non-resident who does not have a permanent establishment in India

2. No TDS or TCS is deducted/ collected for the past years but it is being done in current year

Note: Considering the lack of clarity in few aspects, it is better to wait for the clarification from CBDT in this regard. Further a declaration from relevant parties would also required to avoid future litigation. [Model Declaration]