New TDS rule from July 1: Income Tax Dept issues new functionality compliance check

New Delhi: To ease 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 reporting portal of the Income Tax Department. Earlier, the Finance Act, 2021 had inserted two new Sections 206AB and 206CCA in the Income Tax Act, 1961 which will come into effect from July 1, 2021.

As per official sources, these sections mandate tax deduction or tax collection at higher rate in case of certain non-filers (specified persons). Higher rate is twice the prescribed rate or 5 per cent, whichever is higher.

Specified person means 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.

“To implement these two provisions, tax deductor /collector was required to do a due diligence of satisfying himself if the deductee/collectee is a specified person. This would have resulted in extra compliance burden on such tax deductor/collector.”

As per a PIB release, the tax deductor/collector can feed the single PAN (PAN search) or multiple PANs (bulk search) of the deductee/ collectee and can get a response from the functionality if such deductee/collectee is a specified person. For PAN search, response will be visible on the screen which can be downloaded in the PDF format. For Bulk Search, response would be in the form of downloadable file which can be kept for record.

As per a circular issued by the Central Board of Direct Taxes (CBDT), it has been directed to ease the burden of the tax deductors/collectors by ensuring that the deductors/collectors need to check the PAN in the functionality at the beginning of the financial year without there being any need to check the PAN of the non-specified person again during that financial year.

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