TDS/TCS Compliance Utility for Sections 206AB & 206CCA

Overview

TDS and TCS compliance has become more strict after the introduction of Sections 206AB and 206CCA under the Income Tax Act. These provisions require tax deductors and collectors to apply higher tax rates when dealing with certain non-compliant taxpayers.

To simplify the process, the Income Tax Department has introduced a compliance utility that helps verify whether a person falls under the category of “specified persons”. This tool helps businesses avoid mistakes while deducting or collecting tax.

TDS / TCS Provisions

• With the insertion of these sections namely Section 206AB and Section 206CCA w.e.f. 1st July 2021, it requires the specified persons to deduct TDS and TCS at a higher rates.
• Tax Deducted at Source or Tax Collected at Source will be charged at double the rate specified in the relevant provision of the IT Act or 5 %.

Applicability of TDS / TCS

• The provisions of these sections apply to most payments where TDS is required under Chapter XVII-B of the Income Tax Act.
• Section 206AB does not apply to deductions under Sections 192, 192A, 194B, 194BA, 194BB, 194-IA, 194-IB, 194LBC, 194M and 194N of the Income Tax Act.
• However, it shall not apply to salary, winnings from lottery or crossword, horse race, trust income and cash withdrawals.
• Also, the higher rate of Tax Deducted at Source shall not apply in the case of an NRI who does not have any permanent establishment in India.

Who are the Specified Persons?

• As per the Finance Act, 2021 (as amended by the Finance Act, 2022), the person who has not filed his ITR for the assessment year relevant to the immediately preceding previous year for which the due date under Section 139(1) has expired.
• And whose aggregate amount of Tax Deducted at Source and Tax Collected at Source in that previous year is Rs. 50,000 or more.

Higher rate of TDS

The new rate will be higher of the following rates:

• Twice the tax rate specified under the relevant provision of the Act OR
• Twice the rate or rates in force OR
• At the rate of 5%.

CBDT’s tool to check compliance

To help the taxpayers of TDS and TCS to follow the Compliances of these sections, the IT Department has introduced a new “Compliance Check Functionality for Section 206AB and 206CCA”.

This new tool enables the tax deductors / collectors to verify the specified person as defined in the Income Tax Act. It is expected that this functionality will ease the compliance burden on taxpayers. However, this tool is already functioning through the reporting portal of the IT department.

How to check Compliance Functionality for Section 206AB & 206CCA?

The Tax Deductors can now check whether or not an individual has filed returns or not on the official website of the Income Tax Department. There is a utility available on the reporting portal where by entering the PAN number, the deductors will be able to check the compliance status of the PAN for the purpose of Sections 206AB and 206CCA.

• The taxpayers can use the new Compliance functionality via the reporting portal of the IT department.
• The deductors or the collectors of the TDS/TCS can either check a single PAN or check multiple PANs at the same time from the online utility.
• On a single PAN search, the response will be displayed on the screen showing whether the PAN belongs to a specified person or not.
• The response for bulk search would be in the form of a downloadable file.
• To ease the burden of repeatedly checking PANs, the IT department gave clarification that the PAN(s) once checked in the fiscal year and marked as non-specified need not be re-checked.
• There shall be no addition of any names to the list of specified persons once prepared at the beginning of the FY.
• However, there may be chances that the specified persons may move out of the list during the financial year.
• Hence, re-checking will be required when making tax deductions or tax collections for these (specified person) PAN(s).

It is important to note here that the burden of compliance is on the the person⁠, who may be a prompt filer of returns deducting the tax. CBDT quotes to these effects that “To ease this compliance burden, the Central Board of Direct Taxes has issued a new functionality. Compliance Check for Sections 206AB & 206CCA. This functionality is already functioning through the reporting portal of the income tax department.”

How Ebizfiling Supports TDS/TCS Compliance?

Managing TDS and TCS compliance can become complex for businesses, especially when dealing with multiple vendors or taxpayers. Ebizfiling helps businesses manage these obligations with professional support.

Our team assists with:

• Verifying specified persons under Sections 206AB and 206CCA
• Correct calculation of higher TDS or TCS rates
• PAN verification and compliance checks
• Preparation and filing of TDS returns
• Ensuring businesses follow the latest Income Tax rules

With expert guidance, businesses can avoid errors, reduce compliance risks, and maintain accurate tax records.

Final Thoughts

Sections 206AB and 206CCA were introduced to improve tax compliance among taxpayers who fail to file their income tax returns. These provisions require deductors and collectors to apply higher TDS or TCS rates when dealing with specified persons.

The compliance check utility provided by the Income Tax Department helps businesses verify taxpayer status quickly and apply the correct tax rate. Using this tool and maintaining proper verification records can help businesses avoid penalties and ensure smooth tax compliance.

Frequently Asked Questions