Compliance of 206AB for DDOs

Compliance of 206AB for DDOs

-Dr. Lalit Kumar Setia

In the Union Budget 2021, a new rule was introduced to deduct Tax Deduction at Source (TDS) at higher rates on cases with certain nature of income and from the persons who have not filed Income Tax Return (ITR) in the last two years and total amount TDS exceeds Rs. 50,000 in each year. How to know, whether the person whose TDS is being deducted is the person with requirement to deduct TDS rates at higher rate or not? What will be the rate of TDS if it is required to deduct at higher rate? How to ensure compliance of Section 206AB which is having this rule?

How much TDS be deducted if person lies in certain category to deduct TDS on Higher Rate?

As per provisions, the TDS will be either “twice the rate of TDS normally deducted as specified in a particular relevant section” or 5% whichever is higher. It means the TDS rate will be at least 5% for such persons and higher than 5% if twice rate of TDS is more than 5%.

How to know that the person whose TDS to be deducted, has not filed ITR during last two years and total TDS amount exceeds Rs. 50,000 in each year?

The Deductors (DDOs in Government) required to ensure compliance of 206AB & 206CCA which states to deduct TDS at higher rates for certain category of persons. How to know whether the person whose TDS is being deducted falls in such category or not.

The Income Tax Department web-portal has a functionality to check such persons by inserting their PAN number or PAN Numbers in bulk. The deductors (if required) can feed PAN number of the person and get the response from the web-portal, download the response in .pdf file, and thereafter keep the same or show the same to the person and deduct TDS at higher rates. For the Financial year 2021-22, from 1^st July 2021, it is enforced to implement section 206AB and 206CCA.

The persons who did not file Income Tax Returns (ITRs) of FY 2018-19 and FY 2019-20 and have aggregate of TDS amount Rs. 50,000 or more in each of the previous years; will be listed in that functionality. The Income Tax Department will list such persons every year and according to the list, the Deductors will have to deduct TDS at higher rate for such persons whose name is listed in the functionality.

As per notification no. 1 of 2021-Income Tax dated 22.06.2021:

Compliance Check Functionality for Section 206AB & 206CCA of Income-tax Act 1961

Section 206AB and 206CCA inserted in the Income-tax Act,1961 (effective from 1st July 2021), imposed higher TDS/TCS rate on the “Specified Persons’ defined as under,

“For the purposes of this section ‘ specified person” means a person who has not filed the retums of income for both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be collected, for which the time limit of filing retum of income under sub-section (1) of section 139 has expired; and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in each of these two previous years.

Provided that the specified person shall not include a non-resident who does not have a permanent establishment in India.

Explanation.-For the purposes of this sub-section, the expression ‘permanent establishment” includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.”

2. To facilitate Tax Deductors and Collectors in identification of Specified Persons as defined in sections 206AB and 206CCA, the Central Board of Direct Taxes (“CBDT”), in exercise of powers conferred under section 138(1 )(a)(i) of Income-tax Act, 1961 (Act), has issued Order via F.No. 225/67/2021/ITA.II dated 21.06.2021 , directing that Director General of Income-tax (Systems), New Delhi shall be the specified income-tax authority for furnishing information to the “Tax Deductor/Tax Collector”, having registered in the reporting portal of the Project Insight through valid TAN, to identify the ‘Specified Persons’ for the purposes of section 206AB and 206CCA of the Act through the functionality “Compliance Check for Section 206AB& 206CCA”.

3. Income Tax Department has released a new functionality ·Compliance Check for Section 206AB & 206CCA to facilitate tax deductors/collectors to verify if a person is a “Specified Person” as per section 206AB & 206CCA. This functionality is made available through (https://report.insight.gov.in) of Income-tax Department. Kindly refer to CBDT Circular No. 11 of 2021 dated 21.06.2021 regarding use of functionality under section 206AB and 206CCA of the Income-tax Act, 1961 .

4. The following procedure is laid down for sharing of information with tax deductors/collectors:

a) Registration: Tax Deductors and Collectors can register on the Reporting Portal by logging in to e-filing portal (http://www.incometax.gov.in/) using e-filing login credential of TAN and clicking on the link “Reporting Portal” which is available under “Pending Actions” Tab of the e-filing Portal. After being redirected to the Reporting Portal, the tax deductor/collector needs to select Compliance Check (Tax Deductor & Collector) under Form Type. The details of the principal officer also need to be provided by clicking on “Add Principal Officer” button. The principal officer is the authorized person of the tax deductor/collector to use the Compliance Check functionality on reporting portal. After submission of registration request, email notification will be shared with the Principal Officer along with ITDREIN details and login credentials.

b) Accessing the Compliance Check functionality: 

Principal Officers of the entities (Tax Deductors & Collectors) which are registered with the Reporting Portal through TAN shall be able to use the functionality after login into the Reporting Portal using their credentials. After successfully logging in, link to the functionality “Compliance Check for Section 206AB & 206CCA” will appear on the home page of the Reporting Portal.

c) Using “PAN Search” mode: 

Under the “Compliance Check for Section 206AB & 206CCA” page, “PAN Search” tab may be selected to access the functionality in PAN Search mode. In this mode single valid PAN along with captcha can be entered at a time and output will be available with following fields,

o    Financial Year: Current Financial Year

o    PAN: As provided in the input.

o    Name: Masked name of the Person (as per PAN).

o    PAN Allotment date: Date of allotment of PAN.

o    PAN-Aadhaar Link Status: Status of PAN-Aadhaar linking for individual PAN holders as on date. The response options are Linked (PAN and Aadhaar are linked), Not Linked (PAN & Aadhaar are not linked), Exempt (PAN is exempted from PAN-Aadhaar linking requirements as per Department of Revenue Notification No. 37/2017 dated 11th May 2017) or Not-Applicable (PAN belongs to non-individual person).

o    Specified Person u/s 206AB & 206CCA: The response options are Yes (PAN is a specified person as per section 206AB/206CCA as on date) or No (PAN is not a specified person as per section 206AB/206CCA as on date).

Output will also provide the date on which the “Specified Person” status as per section 206AB and 206CCA is determined.

d) Using “Bulk Search” mode: 

Under the “Compliance Check for Section 206AB & 206CCA” functionality page, “Bulk Search” tab may be access to access the functionality in Bulk Search mode. This mode involves following steps:

i. Preparing request (Input) file containing PANs: Under the “Bulk Search” page, CSV Template to enter PANs details may be downloaded by clicking on “Download CSV template” button. PANs for which “Specified Person” status is required may be entered in the downloaded CSV template. The current limit in the number of PANs in a single file is 10,000.

ii. Uploading the input CSV file: Input CSV file may be uploaded by clicking on Upload CSV button. Uploaded file will start reflecting with Uploaded status.

iii. Downloading the output CSV file: After processing, CSV file containing “Specified Person” status as per section 20SAB & 206CCA of the entered PANs will be available for download and “Status’ will change to Available. Output CSV file will contain PAN, Masked Name, Specified Person Status as per section 20SAS & 206CCA, PAN-Aadhar Link status and other details as mentioned in paragraph c) above. After downloading of the file, the status will change to Downloaded. The download link will expire and status will change to Expired after specified time (presently 24 hours of availability of the file).

5. For any further assistance, Tax Deductors & Collectors can refer to Quick Reference Guide on Compliance Check for Section 206AS & 206CCA and Frequently Asked Questions (FAQ) available under “Resources’ section of Reporting Portal. They can also navigate to the “Help” section of Reporting Portal for submitting query or to get a call back from Customer Care Team of Income-tax Department. Customer Care Team of Income-tax Department can also be reached by calling on its Toll Free number 1800 1034215 for any assistance.

6. This issues with the approval of CBDT. (Sanjeev  Singh), ADG(Systems)-2 CBDT. 

On which categories of income, Section 206AB is not applicable?

The Drawing and Disbursing Officers (DDOs) in Government organizations and employers in Private Sector Organizations; generally deduct TDS on Salaries of the employees u/s 192 of Income Tax Act. The new section 206AB is not applicable on such TDS deduction. Further, it is also not applicable on TDS deducted on withdrawl from Provident Funds u/s 192A, Winnings from Lotteries / races on which TDS is deducted u/s 194B & 194BB, Payment of certain amount on which TDS is deducted u/s 194N, and Income in respect of investment in securitisation trust on which TDS is deducted u/s 194LBC.

Section 206AB and Section 206CCA will be applicable on the persons whose time limit for filing ITR under section 139(1) has expired and the person has not filed ITR during last 2 previous years and also whose aggregate TDS in each of these previous years is Rs. 50,000 or more.

Are you interested in an Online Course related to Income Tax?:

1. https://smartinstituterls.blogspot.com/2022/12/income-tax-matters-in-government.html 

2. https://smartinstituterls.blogspot.com/2022/12/computation-of-income-tax-liability.html

Previous Article

Next Article

Payment and Status of Income Tax

Payment and Status of Income Tax 

Recent directions (as on 26.06.2021) to extend the due dates in Tax Compliance:

Tax Collection by Government:

The Government collects income tax in three ways i.e. Tax Deduction at Source (TDS), Tax Collection at Source (TCS) and Voluntary Payments by Taxpayers i.e. Advance Tax and Self Assessment Tax. It is the responsibility of each citizen, each trader / firm / company to compute and deposit the tax within the prescribed time limits. The taxable amount can be paid in banks by filing the desired challan form and the bank returns the information duly stamped by bank stating BSR (Bankers Serial of Receipt), CIN (Challan Identification Number) and date of payment. The assessee can also check the status of challan by visiting www.tin-nsdl.com and click upon Challan Status Enquiry. Apart from it, the 26AS statement of the assessee will also show the credit of TDS/TCS/Advance Tax/Self Assessment Tax deposited by the assessee.

Tax on Regular Assessment:

The income tax department checks the self-assessed income tax paid by the assessee and in case, it is less than the actual tax then the department raise the demand which is known as tax on regular assessment-400.

Advance Tax:

Advance Tax is calculated on the basis of expected tax liability and it is required to be paid in installments i.e. upto 15% by 15^th June, 45% by 15^th September, 75% by 15^th December, and 100% by 15^th March of the Financial Year. The advance tax is deposited through Challan ITNS 280.

What to do if 26AS is not showing accurate tax credit?

The tax credit is shown on real-time basis in 26AS if payment of the self-assessment tax or advance tax is made. In case of TDS/TCS, the tax credit is shown when the deductor or collector file his TDS/TCS statement by quoting accurate PAN number of the assessee whom tax is deducted or collected at source. In case, the deductor or collector made errors in quoting accurate PAN then the tax credit will not be reflected and in such cases, it is required to file PAN correction statement or to furnish a correction statement by the banker/deductor/collector.

Do You Know

If any taxpayer is giving any amount in "Income from other sources", and paying income tax upon it. Even in such case, he / she requires to maintain proof of the earning and the necessary records as per the provisions of income tax. Merely declaring an income under other sources, cannot be used to make black money transformed in white.

Even if there are no prescribed provision for maintaining any record in any case, then also it's duty of taxpayer who is mentioning an amount as income, to maintain reasonable record to support the claim of income.

Extended due dates by Income Tax Department

Previous Article

Next Article

*Copyright © 2018 Dr. Lalit Kumar. All rights reserved.