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Analysis of Section 206AB and Section 206CCA

Section 206AB and section 206CCA were proposed in the Finance Bill 2021. These sections provide for a higher deduction of TDS and TCS respectively, if certain conditions are met. Let us discuss details about Section 206AB & section 206CCA.

Introduction of Section 206AB 

According to the Section 206AB, tax shall be deducted on any income or amount paid or payable or credited by a person to a specified person, at the rate which is higher of the following-

  • At twice the rate mention in relevant provisions of the Act.
  • At rates in force or twice the rate.
  • At the rate of 5%.

However, this section shall not apply if Tax is needed to be deducted under these sections-

  1. Section 192- TDS on Salary
  2. Section 192A- TDS on premature withdrawal of Employees’ Provident Fund
  3. Section 194B- TDS On Winnings Of Lotteries
  4. Section 194BB- TDS On Horse Race Winning
  5. Section 194LBC- TDS By Securitization Trust
  6. Section 194N- TDS on Cash Withdrawal

If the provisions of Section 206AA are applicable to a specified person, then in addition to the provisions of this section, tax will be deducted at a higher of the rates endow in this section and in Section 206AB.

Introduction of Section 206CCA 

According to the Section 206CCA, tax is required to be collected at source on any sum or amount received by a person from a specified person, at the rate which is higher of the following-

  • At twice the rate mentioned in relevant provisions of the Act.
  • At the rate of 5%.

If the provisions of section 206CC is applicable to a specified person, in addition to this section’s provision, the tax will be collected at higher of the two rates provided in this section and in section 206CC.

What is the Meaning of Specified Person? 

Specified person refers to a person who has not filed the income tax return 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 ITR under sub-section (1) of section 139 has expired and the aggregate of TDS and TCS in his/her case is Rs. 50000 or more in each of these two previous years.

However, the specified person shall not include a person who does not have a permanent establishment in India. The expression “permanent establishment” includes a fixed place of business by which the business of the enterprise is partly or wholly carried on.