In order to prevent tax evasion and keep a track record of the persons filing Income Tax Return, the Income Tax Act is amended time and again by the legislature. The Finance Bill, 2021 has proposed to insert Section 206CCA in order to charge TCS at a higher rate for the persons who have not filed Income Tax Return.
objective of Section 206CCA
The prime objective of Section 206CCA is to enable persons to file their Income Tax Return and it shall come in effect from 1st July, 2021. Earlier, under the Income Tax Act, the provision for charging heavy penalties was there only in case of non furnishing of PAN. Therefore, the similar need was felt for the persons who do not file their Income Tax Return.
Also Read: Which Section Is Applicable – Section 194Q Or Section 206C(1H)?
Provision of Section 206CCA
The newly proposed Section 206CCA read as follows:
‘206CCA. (1) Notwithstanding anything contained in any other provisions of this Act, where tax is required to be collected at source under the provisions of Chapter XVII-BB, on any sum or amount received by a person (hereafter referred to as collectee) from a specified person, the tax shall be collected at the higher of the following two rates, namely:–– (i) at twice the rate specified in the relevant provision of the Act; or (ii) at the rate of five per cent.
(2) If the provisions of section 206CC is applicable to a specified person, in addition to the provisions of this section, the tax shall be collected at higher of the two rates provided in this section and in section 206CC.
(3) For the purposes of this section “specified person” means a person who has not filed the returns of income for both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be collected, for which the time limit of filing return of income under sub-section (1) of section 139 has expired; and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in each of these two previous years:
Provided that the specified person shall not include a non resident who does not have a permanent establishment in India.
Explanation.––For the purposes of this sub-section, the expression “permanent establishment” includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.’.
Applicability of Section 206CCA
Section 206CCA is applicable to the following:
– Persons who are required to file their Income Tax Return under Section 139(1) of the Income Tax Act, but have not filed the Return for two Assessment Years prior to the Previous Year in which tax is to be collected.
-The aggregate TCS for those previous years should be ₹50,000 or more in each of the previous years.
For instance, if the TDS is required to deducted in the Previous Year 2020-2021, then as per provisions of Section 206CCA, Previous Years shall be 2028-2019 and 2019-2020. Accordingly, the Assessment Years shall be 2019-2020 and 2020-2021. The Income Tax Returns of these years shall be taken into consideration, in this instance.
Inapplicability of Section 206CCA
Section 206CCA is not applicable to
– Non resident who does not have permanent establishment in India.
– It does not apply to Sec.192, 192A, 194B, 194BB, 194LBC or 194N
rate of TCS
The rate of TCS charged under Section 206CCA is twice the rate specified in relevant TCS Section or 5%, whichever is higher.
Also Read: Do’s And Don’ts Of Filing Income Tax Return
In case the person covered under this section also covered the deduction or collection of tax at the higher rate u/s.206AA i.e. PAN not furnished or PAN not available cases, then the rate of tax deduction is higher of Section 206AA and Section 206AB.
Our Analysis
The sole purpose for charging higher rate of TDS/TCS in case of non-filing of Income Tax Returns is not just to ensure that the persons are required to carry on their businesses, earn income and pay the applicable taxes thereon but are also additionally required to work for the Government by creating process for collection of the tax by the Department. Overall, this provision has been proposed with the sole objective to “Minimise Tax Evasion and Maximise Filing of Income Tax Returns.”
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