There are two sections in the Tax Code, Section 206AB and Section 206CCA, that mandate higher rates of tax deduction and collection in the case of Specified Persons.
Who are the specified persons?
An individual who satisfies both of the conditions listed below is considered a specified person: He has not furnished the return of income for the assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be deducted or collected, and the deadline for filing the return has passed under section 139(1) of the Income Tax Act, 1961. During the previous year, the total tax deducted and collected exceeded Rs. 50,000. As an example, if he is required to deduct or collect tax in the financial year 2022-23 and he has not filed his income tax return for 2021-22 (the filing date has expired), and the total amount of tax deducted or collected is more than Rs. If the number of specified persons exceeds 50,000 in the financial year 2021-22, section 206AB and sec 206ab of income tax act will apply.
Who are Specified Persons?
A specified person is a person who meets both of the following conditions: He has not submitted the return of income for the assessment year relating to the previous year immediately preceding the financial year in which tax is to be deducted or collected and the due date has expired for filing the return of income under section 139(1). A total of Rs. 50,000 has been deducted and collected in that previous year. The amount of tax deducted or collected will exceed Rs. 50,000 if the tax is to be deducted or collected in the financial year 2022-23 and the employee has not filed a return of income for the year 2021-22 (the due date for filing a return has expired). Sections 206AB and 206CCA will apply if the financial year 2021-22 exceeds 50,000.
Is the Person a Specified Person?
A compliance check for Section 206AB & 206CCA was launched by the Income Tax Department in order to ease the burden of compliance. was made It was available through the Income-tax Department’s reporting portal. Tax deductors and collectors could feed a single PAN (PAN search) or multiple PANs (bulk search) for the deductee or collector. Upon determining if the deductee or collector was a specified person, the functionality responded. PAN Search responses were visible on the screen and could be downloaded as PDF files. Bulk Search responses were downloadable files that could be retained as records. This functionality was explained in paragraph 3 of circular no 11 from 21st June 2021. It is important to note that, as per Sections 206AB & 206CCA, a non-resident with no permanent establishment (PE) in India cannot be included in the specified person. Since the functionality does not have the visibility of non-residents having PE in India, it is possible that non-residents having PE in India will not appear on this list. For non-residents, tax deductors and collectors are responsible for carrying out the necessary due diligence regarding the applicability of sections 206AB and 206CCA.