22 June 2021
Clarification regarding utility on Section 206AB and 206CCA of the Income-tax Act
 
The Finance Act 2021 has made certain amendments in the Income-tax Act, 1961, with provisions related to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) by introducing Sections 206AB and 206CCA. These amendments have been incorporated to tap persons who are earning income but not filing return of income and are applicable from 1 July 2021.

As per the amendment, higher withholding rates are applicable on certain incomes received by the non-filers.

The Central Board of Direct Taxes (CBDT) is launching a functionality "Compliance Check for Sections 206AB & 206CCA," considering that obtaining the data of returns from vendors/ customers would be a herculean task. This functionality will enable stakeholders to determine the applicability of provisions of Section 206AB and 206CCA on payments to be made.

The provisions are not applicable to non-residents except where they have a Permanent Establishment (PE) in India. Hence in these cases, a 'No PE declaration' will be required.

Some of the key features of the utility are mentioned below:
  • A list of specified persons is prepared as of the start of FY 2020-21
  • The utility can be used for verifying a single PAN or multiple PAN at the same time.
  • The report for a single PAN search can be downloaded in PDF form, while the bulk search report would be in a downloadable format that can be stored in a repository for future reference.
  • A list of specified persons would be updated in the functionality on a year-on-year basis considering returns filed by a person immediately preceding two financial years.
  • If a specified person files a valid return of income, including a belated return, for the preceding two financial years, then his name will be removed from the list.
 
Our Comments
Post this clarification, the much-awaited curiosity among the stakeholders has come to rest. This is a welcome move by the department to ease the burden on the stakeholders who otherwise would have to follow the manual process of collecting/collating declarations to determine the applicability of provisions of Section 206AB/206CCA.  
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