Section 206CCA of Income Tax Act has applied with effect from 1st July 2021 which provides provision related to applicability of special TCS Rate for Non-filers of Income Tax Returns.
If
a specified person is not filling his Returns then TCS is applicable as per section 206CCA.
Let's understand in detail what section 206cca is:
What is Section 206CCA of Income Tax Act?
Section 206CCA
provides a higher TCS rate, when tax is required to be collected at source on
any sum received from a specified person.
This
section applies where transactions are done with non-filers of Income Tax
Returns.
Let's say if you
are covered under TCS (Tax collected at source) provisions and you are
collecting TCS at rates which are specified in individual sections.
But
now from 1st July 2021 if the specified person (person who’s TCS is collected)
is not filling his Income Tax Returns, then you have to collect TCS at higher
rates specified in Section 206CCA.
Also Read: Section 206AB- Higher TDS rate for Non-filers of ITR
When you are required to collect TCS under Section 206CCA?
TCS
is collected at a higher rate from specified persons.
Specified person is a person
who satisfies the following conditions:
- Person who has not furnished Income Tax Return for previous year immediately prior to previous year in which TCS is required to be collected
Example: Mr. A is required to collect TCS of Mr. B in F.Y 2021-2022. But Mr. B has not filed ITR of F.Y 2019-2020 and F.Y 2020-2021. Then Mr. A is required to collect TCS as per section 206CCA.
AND
- Time limit of filing Income Tax Return under sub section (1) of section 139 is expired.
AND
- TDS and TCS in aggregate is Rs. 50,000 or more in the said previous year.
Note:
Non-resident not having permanent establishment is excluded from the scope of
specified person.
Also Read: HSN Code (6 digits / 8 digits) Mandatory from 1st April 2021
What is the rate of TCS under section 206CCA?
If
a person is required to collect TCS under section 206CCA then he has to collect
TCS at higher rate specified in this section.
Where
tax is required to be collected at source under the provisions of chapter
XVII-BB, on any sum received from a specified person, then TCS is to be
collected at the higher of the following rates:-
- At twice the rate specified in the relevant provision of the Act; OR
- At the rate of 5%
What if both section 206CC and 206CCA apply?
If
both section 206CC and 206CCA is applicable then the question arises that what
rate of TCS is to be applied and under which section?
Under section 206CC of Income
Tax Act if specified person fails to furnish his PAN (Permanent
Account Number) then TCS is collected at higher of the following rates:-
- At twice the rate specified in the relevant provisions of this Act; OR
- At the rate of 5%
And
now suppose if the person fails to furnish PAN as well as not filing his Income
Tax Returns, then both the section 206CC
and 206CCA become applicable.
Then
in that situation as per the provisions TCS is required to be collected at
higher rates amongst section 206CC and 206CCA.
Point to be noted:
The
rates specified in section 206CC and 206CCA are the same. So if a person in
both sections applies and a higher rate amongst both the sections applies then
the result will be the same as the rate in both sections are the same.
Also Read: E-Invoicing under GST (Applicability from 1st April, 2021)
Conclusion
Section 206CCA of Income Tax Act has applied to that individual who has not filed his returns. So in this way this section will encourage people to file their returns timely like section 206CC encourages people to furnish PAN in order to avoid higher TCS rate.