A ‘specified person’ who fails to file income tax returns for the previous two financial years is subject to tax deductions or collections at a higher rate under Sections 206AB and 206CCA. Section 206AB relates to TDS, whereas section 206CCA relates to TCS.
As mentioned in both sections, if a person meets the following two conditions, he/she is considered a “specified person”:
- In the financial year 2021-22, TDS or TCS must be deducted or collected, but the person hasn’t filed income tax returns for the last two financial years. For example, prior years for the financial year 2018-19 and 2019-20 would be 2018-19 and 2019-20, respectively.
- In each of the last two financial years, there has been more than Rs. 50,000 in TDS or TCS
Under Section 206AB and Section 206CCA, the Tax Deduction Is Higher
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Taxpayers taking advantage of sections 206AB and 206CCA will pay double the original TDS or TCS rate, whichever is higher. Also, if the rate In the event that 20% of a specified person’s PAN is not provided, then TDS will be deducted at the.
The applicability of sections 206AB and 206CCA
There are no exceptions to the application of Sections 206AB and 206CCA to all types of payments except for:
- Lottery payments (194B): TDS
- Provident fund withdrawals (192A): TDS
- Paying salary with TDS (192)
- Income from investment securitizations (194LBC)
- Winnings from horse races (194BB) are subject to TDS
- The TDS on cash withdrawals (194N)
206AB and 206CCA compliance check
The average business makes hundreds of TDS payments every year. And it’s practically impossible to manually check whether the deductee or collectee is in default under Section 206ab compliance check
Fortunately, the Income Tax Portal now offers an online ‘compliance check function’ for sections 206AB and 206CCA, which helps deductors and collectors identify the ‘specified person.’
How does the income tax portal’s compliance check function work?
In the portal, you can type in the PAN of the deductees/collected and a response sheet will be generated which indicates whether they are ‘specified persons’.
You can search the portal in two ways:
- You can verify and check only one PAN using Single PAN Search
- Using Bulk Search, you can search multiple PANs at the same time. After uploading all the PAN numbers in a CSV file, you will have an output CSV file containing a list of all the ‘specified persons.
When are the lists for Sections 206AB and 206CCA prepared?
At the beginning of the financial year, the income tax authorities prepare a comprehensive list of specified persons. This list includes details of people who have not filed their income tax returns for the last two years and have accumulated a total TDS and TCS of Rs 50,000 or more.
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