• By ADMIN
• Posted 22 Apr, 2023
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FAQs on Higher rate of TDS for non-filers of Income tax Return

1. Who are called as “non-filers of Income tax Return” for the purpose of Higher rate of TDS or TCS?

Income-tax Assessee, those who are required to deduct (TDS) or collect (TCS) tax at source must ensure that every payee to whom deductions made or collection done as to whether they fall into the category of “specified persons” or not. Anybody who failed to file his return of income for the past 2 years (for which due date had been expired), in either of the year, had tax credits in his Form 26AS aggregating to Rs.50,000 or more are “specified persons”. The specified persons are called as Non-filers of Income tax Return, to whom the payer has to apply higher rate of TDS/TCS.

2. How to identity specified persons/Non-filers of Income-tax Return?

The Income-tax department had provided a  facility to upload all the PAN of the payees in a single excel worksheet. In which the system will report against each PAN whether it is a specified person or not. An Income-tax Assessee, using his TAN can register in the reports.insight.gov.in for Compliance Check for Section 206AB and 206CCA. There is a Quick Reference Guides also available in the website. Those who have registered and not able to get their login credentials, try resetting the password, you may get the solution.

3. How frequently one must check the status?

It is sufficient to check at the beginning of the financial year in the reports.insight.gov.in for a PAN. Further, when new payee gets into your business, it is required to check whether he is a specified person or not. A person who already a specified person may become no so subsequently, but a non-specified person will not become a specified person subsequently.

4. What is the Higher Rate of TDS?

Please note that if you are dealing with a payee who is  a specified person, then TDS/TCS rates are not as per the normal rates given in the Income-tax, it is higher of the following rates:

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.

5. Is there any exceptions / exemptions from the higher rate?

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

• Non-resident who does not have a permanent establishment in India
• Wherever a person is no required to file return of income as notified by the Central Government.
• Sec 192 - TDS on Salary
• Sec 192A - Payment of accumulated balance due to an employee
• Sec 194B - Winning from lottery or crossword puzzle.
• Sec 194BA – Winning from Online Games.
• Sec 194BB – Winning from Horse Race.
• Sec 194-IA – Payment on transfer of certain immovable property other than agricultural land.
• Sec 194-IB : Payment of rent by certain individuals or HUF.
• Sec 194-LBC: Income in respect of investment in securitization trust.
• Sec 194M: Payment of certain sums by certain individuals or HUF.
• Sec 194LBC - Income in respect of investment in securitization trust
• Sec 194N - Payment of certain amounts in cash

6. What is the higher rate of TCS to be collection for a specified person?

Higher of the following rates to be considered: -

1. Twice the rate of TCS as per relevant section

2.  At the rate of 5%

7. Is there any exceptions or exemptions from higher rate of TCS?

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. Wherever a person is no required to file return of income as notified by the Central Government.

8. What are the consequences of non-compliance with section 206AB, 206CCA?

Penalty: Under the Indian Income-tax Act, if Tax Deducted at Source (TDS) is short deducted or not deducted as required, a penalty equivalent to the sum of the shortfall will be levied. Likewise, if Tax Collected at Source (TCS) is failed to be collected, a penalty equivalent to the amount not collected will be levied. This penalty is imposed to ensure that the government receives the due tax revenue and to deter non-compliance with the TDS/TCS provisions of the Income-tax Act. It is important for deductors and collectors to accurately calculate and deduct TDS/TCS as per the provisions of the law to avoid any penalty or legal consequences

Interest on short deduction & non-deduction of TDS

If a person fails to deduct the entire amount or any portion of the tax as required under the Indian Income-tax Act, they will be liable to pay interest at the rate of 1% per month or part of the month for the period during which the shortfall or non-deduction occurred. The imposition of interest is a means to compensate for the delay in the receipt of tax revenue by the government. It is important for deductors to ensure that the TDS is accurately calculated and deducted in a timely manner to avoid any interest liability