TDS at double rate for non-filers- [Updated]

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A new section 206AB in the income tax Act, provides for deduction of tax at source at double the prescribed rate in case of of non-filers who have

  • Not filed income-tax return for last 2 assessment years
  • TDS / TCS exceeds Rs. 50,000 in each of these two years

There are exemptions for certain sections and to non-residents.

A similar section 206CCA has the same provision in respect of tax collection at source.

This article will not go into the legal analysis of these sections ,but will look into the practical compliance procedures required to be put in place by deductors as the provisions come into force from 1 July 2021

Timelines

  • As the new section is applicable from 1 July 2021 so the previous year is 2021-22
  • Immediate preceding two previous years are 2020-21 and 2019-20
  • Due date for filing income tax return in respect of previous year 2020-21 has been extended as follows
If liable to tax audit or audit under other laws30-11-2021
If covered under Transfer Pricing Regulations31-12-2021
Other cases30-09-2021

This seems to imply that the information cannot be collated at least till 30 Sept  2021.

However there is a another viewpoint that till Sept 30,3021 ,the previous two years will be 2018-19 and 2019-20. This viewpoint is more equitable since the provisions states that deductee has to file return for preceding two previous years for which time limit u/s139(1) has expired. Current financial is year 2021-2022. For the  preceding FY 2020-2021, time limit for filing return has  not expired. There for the deductor has to ensure that deductee has filed the returns for FY 2018-2019 & 2019-2020 for compliance of this section upto 30/09/2021 in case of non audit case and upto 30/11/2021 in case  of audit case of audit cases.

Information required in respect of deductees

  1. Whether the deductee has filed income-tax return for last 2 assessment years.
  2. What is the TDS / TCS amount in each of the last 2 assessment year

How can deductors collect this information

There are two possibilities :

A. Department portal  : The current income-tax web site is being revamped and the new website will be launched on June 7, 2021.  The GST portal has a facility where upon entering a GSTIN , completed details of returns filed during last 12 months appear in a table :

A facility on the similar lines, if provided, will make compliance burden easy for the tax deductors.

Even getting this information will require entering PAN followed by Captcha.  This can be managed if the number of deductees is small. For organisations / banks where the number of deductees runs in thousands/lakhs , an API based automated solution will be better

After writing this blog, we came across this tweet by income tax department. Hence department will provide the required tool

B. Asking deductees

In case department does not provide above information, there will be no choice but to ask each deductee the following information

Assessment YearITR Ack. NoTDS/TCS AmountReason if return not filed

It is not expected that deductees can be requested to upload ITR copies, as they contain confidential income details , so all that can be asked is Acknowledgement number.

Once the acknowledgement number is received, again it will have to be searched on the income tax portal to see if the the acknowledgement number is correct

Self-declarations ?

Some deductors have opined that getting a signed self declaration by the deductees to the above effect can be considered as sufficient compliance.

Hopefully situation will become clearer after launch of new income tax portal and clarifications from the department.

Blog written by CA Dinesh Tejwani / CA Sahaj Kabra

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