Section 206CCA: Higher TCS Rate for Non-Filers of ITR’s

Section 206CCA of Income Tax Act will be applicable 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 filed Income Tax Return for previous 2 years 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 each of 2 previous years. 

    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 will apply 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. 

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