If you happen to be among those who have still not filed your income tax return (ITR) for the financial year 2020-21, then you would have to face a higher tax deduction at source (TDS) from this financial year onwards.
The Central Board of Direct Taxes (CBDT) has issued a circular regarding the use of functionality under sections 206AB and 206CCA of the I-T Act, 1961 to determine those who haven’t filed their income tax returns, and who will be subject to higher TDS from April 1, 2022.
According to the circular, the specified person means a person who satisfies both the following conditions:
He has not filed his/her income tax returns for both of the two assessment years relevant to the two previous years immediately before the previous year in which tax is required to be deducted/collected. Two previous years to be counted are required to be those whose return filing date under sub-section (I) of section 139 has expired.
Aggregate of tax deducted at source and tax collected at source is Rs 50,000 or more in each of these two previous years.
Further, it has been provided that provisions of section 206AB will not apply in case of deduction of tax on transfer of virtual digital asset (YDA) under section 1945 of the Act to a person being an individual or Hindu undivided family, whose sales, gross receipts or turnover from the business carried on by him or profession exercised by him does not exceed Rs 1 crore in case of business or Rs 50 lakh in case of profession, during the financial year immediately preceding the financial year in which such YDA is transferred, or if such person does not have any income under the head “profit and gains of business or profession”.
The circular further states that the tax deductor or collector is required to do a due diligence of satisfying himself if the deductee or the collectee is a specified person. In order to ease this compliance burden, the IT department had come out with the functionality of “Compliance Check for Section 206AB & 206CCA”, which was made available through reporting portal of the I-T department.
It enabled the tax deductor or the collector to feed the single PAN (PAN search) or multiple PANs (bulk search) of the deductee or collectee. The functionality then gave a response if such deductee or collectee was a specified person. For PAN search, the response was visible on the screen which could be downloaded in the PDF format. For bulk search, the response was in the form of downloadable file which could be kept for record. The logic of this functionality was explained through paragraph 3 of circular no II, dated June 21, 2021.
The Finance Act 2022 has brought about the following changes in the above-mentioned provisions, i.e., Section 206AB and Section 206CCA of the Act with effect from April 1, 2022.
