Sections 206AB & 206CCA Made Simple for Businesses

Overview

TDS/TCS Compliance became much stricter after Sections 206AB & 206CCA were introduced under the Income Tax Act. These provisions required businesses to deduct or collect tax at higher rates when dealing with certain taxpayers who had not filed their income tax returns.

To make this process easier, the Income Tax Department also introduced an online compliance check utility. Using this tool, businesses could verify whether a taxpayer fell under the category of a “specified person” before applying higher TDS or TCS rates.

But as per the Finance Act, 2025, Sections 206AB and 206CCA have been omitted with effect from 1 April 2026.

In this article, we’ll understand how the Sections 206AB & 206CCA worked, who qualified as specified persons, how the compliance utility functioned, and what changes have been introduced under the Income Tax Act, 2025.

Applicability of Sections 206AB & 206CCA

Sections 206AB & 206CCA came into effect from 1 July 2021 with the objective of improving TDS/TCS compliance among taxpayers who had not completed their Income Tax Return filing within the prescribed time.

Under these provisions, businesses were required to deduct or collect tax at higher rates while making payments to specified persons.

The higher TDS or TCS rate was applicable at the highest of the following:

• Twice the rate specified under the relevant provision of the Income Tax Act.
• Twice the rate or rates in force.
• 5%.

Since incorrect deduction or reporting could lead to notices and penalties, businesses were also expected to maintain proper TDS return filing compliance under the applicable tax provisions.

Applicability of TDS/TCS Provisions under Sections 206AB & 206CCA

The provisions of Sections 206AB & 206CCA applied to most transactions where TDS was deductible under Chapter XVII-B of the Income Tax Act. However, Section 206AB did not apply to certain deductions covered under Sections 192, 192A, 194B, 194BA, 194BB, 194-IA, 194-IB, 194LBC, 194M, and 194N. Specified cash withdrawal transactions covered under Section 194N of the Income Tax Act were excluded from the applicability of Section 206AB.

In simple terms, payments such as salary, lottery winnings, horse race winnings, certain property transactions, and specified cash withdrawals were kept outside the scope of these provisions.

Furthermore, Section 206AB was also not applicable to non-residents who did not have a permanent establishment in India. In cases where both Section 206AA and Sections 206AB/206CCA became applicable together, tax was generally deducted or collected at the higher applicable rate.

Who Were the Specified Persons under Sections 206AB & 206CCA?

As per the Finance Act, 2021 (amended by the Finance Act, 2022), a specified person generally refers to a taxpayer:

• who had not filed the income tax return for the relevant assessment year within the due date prescribed under Section 139(1).
• whose aggregate TDS and TCS deducted/collected during the relevant previous year was ₹50,000 or more.

The Income Tax Department identified such persons through its compliance reporting system.

CBDT’s Compliance Check Utility for Sections 206AB & 206CCA

To reduce compliance difficulties for businesses, the Income Tax Department introduced the “Compliance Check Functionality for Sections 206AB & 206CCA”.

This online utility allowed tax deductors and collectors to check whether a PAN belonged to a specified person before deducting or collecting tax at higher rates.

The utility was available through the reporting portal of the Income Tax Department and helped businesses avoid incorrect TDS/TCS deductions.

How to Check Compliance Functionality for Sections 206AB & 206CCA?

Businesses could check the compliance status of taxpayers through the reporting portal of the Income Tax Department.

The utility allowed users to:

• Verify a single PAN deatils
• Check multiple PANs together through bulk search.
• Identify whether a taxpayer qualified as a specified person.
• Download compliance reports for multiple PANs.

For single PAN verification, the result was displayed directly on the screen. For bulk searches, the response was generally provided through a downloadable file.

The Income Tax Department had also clarified that if a PAN was verified as “non-specified” at the beginning of the financial year, repeated checks were generally not required unless the taxpayer’s compliance status later changed.

However, businesses were still expected to carry out periodic verification wherever necessary to ensure proper TDS/TCS Compliance.

It is important to note that the responsibility for correct compliance under Sections 206AB & 206CCA primarily remained with the tax deductor or collector.

Discontinuation under Income Tax Act, 2025

Under the Income Tax Act, 2025, Sections 206AB & 206CCA have been omitted with effect from 1 April 2026.

As a result, the earlier mechanism that required higher TDS or TCS rates for specified non-filers no longer applies under the revised tax framework.

The compliance check utility and specified person verification process introduced specifically for Sections 206AB & 206CCA may therefore lose practical relevance going forward.

However, businesses should continue monitoring official CBDT updates and government notifications for any future compliance-related changes.

How Ebizfiling Supports TDS/TCS Compliance?

Managing TDS/TCS compliance can often get complicated for businesses, especially when multiple vendors, deductees, changing tax provisions, and regular reporting requirements are involved. Even a small mismatch in PAN details, deduction rates, or return filing can lead to notices, penalties, or compliance issues later.

That’s where Ebizfiling steps in to make things easier for you. Our team helps businesses handle end-to-end TDS/TCS compliance, including PAN verification checks, correct calculation of applicable tax rates, preparation and filing of TDS returns, and ongoing support through our tax consultancy services under updated Income Tax provisions.

With the right guidance and timely compliance support, you can reduce errors, avoid penalties, and maintain accurate tax records without stress. If you need assistance with TDS/TCS compliance or return filing, you can connect with Ebizfiling for expert support and hassle-free compliance management.

Final Thoughts

Sections 206AB & 206CCA were introduced to improve TDS/TCS Compliance by applying higher tax deduction and collection rates on certain non-filers of income tax returns.

To support businesses, the Income Tax Department also introduced a compliance check utility that helped verify specified persons and apply the correct TDS/TCS rates.

However, the Income Tax Act, 2025 has omitted Sections 206AB and 206CCA with effect from 1 April 2026. with effect from 1 April 2026.

Businesses should therefore stay updated with the all latest CBDT notifications published in their site and revised TDS/TCS Compliance requirements under the new Income Tax framework.

Suggested Reads:

How to file Nil TDS Return?  
About the Income Tax Annual Information Statement (AIS)

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