The income tax act has laid down certain provisions to tap the non-filers of return of income. Section 206AB and 206CCA of the income tax act are prominent in this regard. Section 206AB states that in respect of amounts paid or payable to specified persons, the TDS shall be deducted at higher of the following rates:
Further, Section 206CCA states that where the TCS is required to be collected from specified persons, it shall be collected at higher of the following rates:
Specified persons in both the above sections are the same and include those persons who satisfy both the following conditions:
For instance, for PY 2022-23, the relevant previous year would be PY 2020-21. Therefore, it should be ensured that the income tax return for PY 2020-21 (AY 2021-22) is filed. Earlier, the requirement was to file the income tax returns for 2 assessment years. However, as per the recent circular the provisions of Section 206AB and 206CCA have been amended to reduce it to one year.
The assessee responsible for deducting/collecting TDS/TCS faced difficulties in tracking such persons to whom Section 206AB and 206CCA became applicable. Therefore, the government introduced a functionality “Compliance Check for Section 206AB and 206CCA” that can be accessed from the reporting portal of the income tax department.
The tax deductors and collectors can feed the PAN, as well as bulk PANs, and the functionality will determine whether the deductee or collectee is a specified person. From the FY 2022-23, the functionality will operate based on the following logic as discussed in Circular No. 10 of 2022 dated 17th May 2022:
Removal of the names of the specified person from this list will be done if any of the following conditions are satisfied:
|Reason for Removal||Date of Removal|
|If the specified person files his income tax return for AY 2021-22 during the FY 2022-23||On the date of filing of the valid income tax return during the FY 2022-23|
|If the specified person files the income tax return for AY 2022-23||
On the due date for filing the income tax return for AY 2022-23 or on the date of actual filing of a valid return, whichever is later.
|If the aggregate TDS and TCS in PY 2021-22 is less than Rs. 50,000||On the first due date u/s 139(1) in FY 2022-23 i.e., 31st July 2022|
|Belated and revised TDS and TCS returns for the relevant financial year that are filed during the FY 2022-23.||On regular basis|
The above list will be freshly drawn at the start of each financial year. Also, as per Sections 206AB and 206CCA, the specified persons shall not include non-residents not having a permanent establishment in India. Tax deductors and collectors are advised to carry out necessary due diligence in respect of non-residents as the functionality does not have the visibility of non-residents having PE in India. Therefore, it is probable that such non-residents having PE in India may not get reflected in the list.
While the logic has been clear from the above discussion, the procedural aspect of using this new compliance check functionality was discussed in Notification No. 01 of 2021 dated 22nd June 2021 as under:
The tax deductors and collectors shall get registered on the compliance check portal by following the below steps:
Principal officers will be able to use the functionality after login into the reporting portal. Once logged in, the link to the Compliance Check functionality will appear on the home page of the reporting portal.
Two modes are available in the Compliance Check Functionality i.e., ‘PAN Search Mode’ and ‘Bulk Search Mode’.
Under this mode, a single PAN and the captcha shall be entered at a time. The following shall be the search result:
The above compliance check functionality for Section 206AB and 206CCA eased the compliance burden on the tax deductors and collectors. However, the government noted that some of the deductors, as well as collectors, still asked for evidence of returns filed from the deductees / collectees. This defeats the entire purpose of the functionality and might cause genuine hardships to the taxpayers. Therefore, the government has advised using the above user-friendly functionality for Section 206AB and 206CCA compliance.
In case of any query, please feel free to contact the ASC Group.
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