Sunday, 14 August 2022 12:07 PM IST

Circular on use of functionality under section 206AB & 206CCA

F. No. 370 I 33/3/2022-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(TPL Division)
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Circular No. 10 of 2022
New Delhi, Dated 17 May 2022

Subject: Circular regarding use of functionality under section 206AB and 206CCA of the Income-tax Act, 1961 - reg.

Finance Act, 2021 inserted two new sections 206AB and 206CCA in the Income-tax Act 1961 (hereinafter referred to as “the Act”) which took effect from 1st day of July 2021. These sections (as they stood prior to its amendment by the Finance Act 2022) mandated tax deduction (section 206AB) or tax collection (section 206CCA) at higher rate in case of certain non-filers (specified persons) with respect to tax deductions (other than under sections 192, 192A, 194B, 194BB, 194LBC and 194N) and tax collections. Higher rate was twice the prescribed rate or 5%, whichever is higher. Specified person meant a person who satisfies both the following conditions: –

(i) He has not filed the returns of income 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 (1) of section 139 has expired.

(ii) Aggregate of tax deducted at source and tax collected at source is rupees fifty thousand or more in each of these two previous years.

2. It can be seen that the tax deductor or the tax collector was required to do a due diligence of satisfying himself if the deductee or the collectee was a specified person? In order to ease this compliance burden the Income-tax Department came out with functionality “Compliance Check for Section 206AB & 206CCA”, which was made available through reporting portal of the Income-tax 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, response was visible on the screen which could be downloaded in the PDF format. For Bulk Search, 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 11 dated 21st June 2021.
3. 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 1st April, 2022:

(i) The provision of higher TDS under section 206AB is not applicable on tax to be deducted under sections 194-1A, 194-IB and 194M. This is in addition to already existing provision of its non-applicabilily on tax to be deducted under sections 192, 192A, 194B, 194BB, 194LBC and 194N.

(ii) The definition of specified person has been amended in both section 206AB and section 206CCA. Now “specified person” means a person who satisfies both the following conditions:

(a) 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/collected. The previous year to be counted is required to be the one whose return filing date under sub-section (I) of section 139 has expired.

(b) Aggregate of tax deducted at source and tax collected at source is rupees fifty thousand or more in that previous year.

(iii) 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 (VDA) under section 194S 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 one crore rupees in case of business or fifty lakh rupees in case of profession, during the financial year immediately preceding the financial year in which such VDA is transferred or if such person does not have any income under the head “Profit and gains of business or profession”