Budget 2021 has introduced new provisions for collection of TCS at a higher rate for non-filers of income tax return (ITR). In order to discourage the practice of not filing returns by the persons in whose case substantial amount of tax has been collected, it is proposed to provide that a person in whose case TCS of Rs. 50,000 or more has been made for the past two years and who has not filed return of income, the rate of TCS shall be at the double of the specified rate or 5%, whichever is higher.
Section 206CC of the Act provides for a higher rate of TCS for non-furnishing of PAN. It is seen that while this provision has served its purpose in ensuring obtaining and furnishing of PAN by various person, there is need to have similar provisions to ensure filing of return of income by those person who have suffered a reasonable amount of TCS.
Hence, it is proposed to insert a section 206CCA in the Act as a special provision for providing for higher rate of TCS for non-filers of income-tax return.
Proposed section 206CCA of the Act would apply on any sum or amount received by a person (herein referred to as collectee) from a specified person. The proposed TCS rate in this section is higher of the following rates:-
(i) twice the rate specified in the relevant provision of the Act; or
(ii) the rate of five percent
If the provision of section 206CC of the Act is applicable to a specified person, in addition to the provision of this section, the tax shall be collected at higher of the two rates provided in this section and in section 206CC of the Act.
The specified person is a person who has not filed the returns of income for both of the two assessment years relevant to the two previous years which are immediately before the previous year in which tax is required to be collected, as the case may be. Further the time limit for filing tax return under sub-section (1) of section 139 of the Act has expired for both these assessment years. There is another condition that aggregate of tax collected at source in his case is rupees fifty thousand or more in each of these two previous years. Specified person shall not include a non-resident who does not have a permanent establishment in India
Clause 52 of the Finance Bill, 2021 seeks to insert the new section 206CCA.
Insertion of new section 206CCA.
Special provision for collection of tax at source for non-filers of income-tax return.
52. After section 206CC of the Income-tax Act, the following section shall be inserted with effect from the 1st day of July, 2021, namely:––
‘206CCA. (1) Notwithstanding anything contained in any other provisions of this Act, where tax is required to be collected at source under the provisions of Chapter XVII-BB, on any sum or amount received by a person (hereafter referred to as collectee) from a specified person, the tax shall be collected at the higher of the following two rates, namely:––
(i) at twice the rate specified in the relevant provision of the Act; or
(ii) at the rate of five per cent.
(2) If the provisions of section 206CC is applicable to a specified person, in addition to the provisions of this section, the tax shall be collected at higher of the two rates provided in this section and in section 206CC.
(3) For the purposes of this section “specified person” means a person who has not filed the returns of income 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 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 each of these two previous years:
Provided that the specified person shall not include a nonresident 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.’.
Provisions of Section 206CCA Explained
Clause 52 of the Bill seeks to insert section 206CCA of the Income-tax Act relating to specified provisions for the collection of tax at source on non-filers of income-tax return.
Sub-section (1) of the proposed new section 206CCA seeks to provide that notwithstanding anything contained in any other provisions of this Act, where tax is required to be collected at source under the provisions of Chapter XVII-BB, on any sum or amount received by a person (hereafter referred to as collectee) from a specified person, the tax shall be collected at the higher of the following two rates, namely, at twice the rate specified in the relevant provision of the Act; or at the rate of five per cent.
Sub-section (2) thereof seeks to provide, that if the provision of section 206CC is applicable to a specified person, in addition to the provision of this section, the tax shall be collected at higher of the two rates provided in this section and in section 206CC.
Sub-section (3) thereof seeks to define “specified person” tomean a person who has not filed the returns of income 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 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 each of these two previous years.
Proviso to the proposed sub-section (3) provides that the specified person shall not include a non-resident who does not have a permanent establishment in India.
Explanation to the said section seeks to provide that 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.
This amendment will take effect from 1st July, 2021.
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