If you failed to file an ITR for the fiscal year 2020-21 (assessment year 2021-22), increased TDS may be applied to certain profits you will earn during the current fiscal year 2022-23, according to new provisions.
The CBDT introduced sections 206AB and 206CCA of the Finance Act 2021, which were incorporated into the Income-tax Act, 1961 effective from July 1, 2021. Under these sections, if you have missed filing ITR for financial year 2020-21 (assessment year 2021-22), then higher TDS may be applicable on certain incomes you will earn during the current financial year 2022-23. You will be termed as a ‘specified person’.
Who is a specified person?
A “specified person” is a person who has not filed a return of income for the assessment year immediately preceding the fiscal year in which tax is required to be deducted, for which the time limit for filing a return of income has expired, and in whose case the aggregate of tax deducted at source and tax collected at source in the said previous year is Rs 50,000 or more.
The deadline to file an original ITR for the fiscal year 2020-21 was December 31, 2021. If you have not filed your ITR by this deadline, you will be subject to the higher TDS amount in FY 2022-23.
According to the new section imposed, “For the purposes of this section “specified person” means a person who has not furnished the return of income for the assessment year relevant to the previous year immediately preceding the fiscal year in which tax is required to be deducted, for which the time limit for furnishing the 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 the said previous year: 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.”
Higher tax rate that will be applicable on specified persons
As per income tax laws, higher TDS/TCS will be deducted at the rate, highest of the following on specified persons:
a) Twice the rate specified in the relevant provision of the Act; or
b) Twice the rate or rates in force; or
c) The rate of five per cent.
How will banks check if higher TDS has to be deducted?
The Income Tax Department, via a notification on June 9, 2022, has released a Compliance Check for Section 206AB & 206CCA functionality to help tax deductors/collectors like banks can determine if a person is a “Specified Person” as defined by Section 206AB & 206CCA. This capability is provided by the Income-tax Department (https:/lreport.insight.gov.in).
To determine if greater TDS is required, a bank or other financial institution might use the Income Tax Department’s ‘Compliance Check for Section 206AB & 206CCA’. To determine if the concerned individual is a specified person for whom greater TDS is applicable, the tax deductor will be needed to enter a single PAN or several PANs.
On the Compliance Check for Section 206A8 & 206CCA page, click the -PAN Search tab to access the PAN Search mode capabilities. In this mode, only one valid PAN and captcha can be submitted at a time, and the output will include the fields below.
Financial Year: Current Financial Year
• PAN: As provided in the input.
• Name: Masked name of the Person (as per PAN).
• PAN Allotment date: Date of allotment of PAN.
• PAN·Aadhaar Link Status: Status of PAN-Aadhaar linking for individual PAN holders as on date. The response options are Linked (PAN and Aadhaar are linked), Not Linked (PAN & Aadhaar are not linked), Exempt (PAN is exempted from PAN-Aadhaar linking requirements as per Department of Revenue Notification No. 37/2017 dated 11th May 2017) or Not-Applicable (PAN belongs to non-individual person).
• Specified Person u/s 206AB & 206CCA: The response options are Yes (PAN is a specified person as per section 206ABI206CCA as on date) or No (PAN is not a specified person as per section 206ABl206CCA as on date).
Also, the date on which the “Specified Person-status” as defined by sections 206AB and 206CCA is determined will also be included in the output.
Click here to read the full CBDT notification. https://incometaxindia.gov.in/communications/notification/notification-no-01-of-2022.pdf