To check whether a taxpayer will be eligible to pay Tax Deducted at Source (TDS) at higher rates from next month, the Income Tax department has introduced a new functionality on the tax portal. The finance ministry introduced a new section 206AB in the Budget 2021 to deduct TDS at higher rates for certain non-filers. If a taxpayer has not filed TDS in the last two years and aggregate of TDS exceeds Rs 50,000 in each year, the Income Tax department will charge more while filing the income tax returns (ITR) from July 1. The rate of TDS will be either twice the rate specified under the relevant section or provision or five per cent, whichever is higher.
Now, the tax collector or tax deductor has to check whether a person is eligible to pay TDS at higher rate from July. “This can lead to extra compliance burden on such tax deductor or tax collector,” the Central Board of Direct Taxes (CBDT) said in a statement. To ease the burden, the regulator has issued a new functionality “Compliance check for Sections 206AB & 206CCA”. “The tax deductor or the collector can feed the single PAN (PAN search) or multiple PANs (bulk search) of the deductee or collectee and can get a response from the functionality if such deductee or collectee is a specified person,” the CBDT mentioned. This functionality is made available through reporting portal of the Income-tax department, it further added.
For single PAN Search, the response will be visible on the screen. The tax department will allow the deductors to download the result in the PDF format. For bulk search of PAN details, the result will be available as downloadable file.
News18.com first reported on June 10 that income tax department will have new system to check compliance norms for Section 206AB.”It is important to note that to check GSTR compliance the GST portal already has this kind of feature. Now for ITR, the income tax portal is also expected to have this feature,” Vivek Jalan, partner, Tax Connect Advisory Services LLP told News18.com.
The tax department has prepared a list as on the start of the financial year 2021-22, taking previous years 2018-19 and 2019-20 previous years. The list contains name of taxpayers who did not file return of income for both assessment years 2019-20 and 2020-21 and have aggregate of TDS of Rs 50,000 or more in each of these two previous years.
“The deductor or the collector may check the PAN in the functionality at the beginning of the financial year and then he is not required to check the PAN of non-specified person during that financial year,” said CBDT.
The tax department will not add any new names in the list during the financial year 2021-22. “This is a taxpayer friendly measure to reduce the burden on tax deductor a collector of checking PANs of non-specified person more than once during the financial year,” the regular said.
“A fresh list will be prepared at the start of each financial year following all the norms mentioned by CBDT. For example, at the beginning of the financial year 2022-23 a fresh list would be prepared with previous years 2019-20 and 2020-21 as the two relevant previous years. Then, no name would be added to the list of specified persons during the financial year and only name would be removed,” it added.
The same process will be followed to prepare a list for Tax Collected at Sources (TCS). “It may be noted that as per the provisos of sections 206AB & 206CCA of the Act, the specified persons shall not include a non-resident who does not have a permanent establishment in India,” CBDT mentioned.
“There was an apprehension among trade and industry incase this checking has to done multiple times in a financial year, but the same has been clarified that even if a vendor has not filed its return by the due date in AY 21-22 his compliance status for the tax deductor till 31st March 2022 will be compliant on the basis of the tax return filing of the previous two years,” Vivek Jalan, partner, Tax Connect Advisory said. “Further in case a non-compliant person files his returns during FY 21-22, then it’s status changes to compliant and it is saved from the rigours of Sec 206AB,” he added.
This feature will be made available only to Tax Deductors with a Valid TAN Number and not to all taxpayers, Jalan said. “Possibly going forward this facility may be made available to all persons with a PAN No. This would act as a double check for the recipients to see whether the vendors are compliant or not and it may help them select a compliant vendor over a non compliant one,” he added.
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