For Internal Use Only
Short Note on Section 206AB and 206CCA of the Income Tax Act, 1961 (Applicable from 01 st July
2021):
1. Sections 206AB and 206CCA are the two new sections in the Income Tax Act, 1961 inserted
in the Finance Act, 2021.
2. The sections are with respect to higher rate of TDS (Section 206AB) and TCS (Section
206CCA) for non-filers of Income Tax Return.
3. Specified Person (Non-Filer): A specified person is a person who has not filed the returns of
income for both of the immediately preceding two years relevant to the year in which tax is
required to be deducted or collected, as the case may be and due date prescribed under
Section 139(1) to file such return has expired and the aggregate of tax deducted at source
and tax collected at source in his case is INR 50,000 or more in each of these immediately
preceding two years.
4. The Specified Person shall not include a non-resident who does not have a permanent
establishment in India.
5. Types of Payments Covered:
The new sections would apply on any sum, income, or amount paid or payable or credited,
by a person to a specified person.
6. Section 206AB shall not apply where the tax is required to be deducted under the following
sections:
Section Particulars
192 TDS on salary
192A TDS on payment towards accumulated balance due to an employee
participating in a recognised provident fund ('PF')
194B TDS on income from lottery or crossword puzzle.
194BB TDS on income from horse races
194LBC TDS on income in respect of investment in securitization trust
194N TDS on cash withdrawal in excess of INR 20 Lakhs
7. Higher rates of TDS to such specified person shall be higher of:
(a) twice the rate specified in the Act;
(b) twice the rates in force;
(c) rate of 5%
8. Higher rates of TCS to such specified person shall be higher of:
(a) twice the rate specified in the Act
(b) rate of 5%
9. Section 206AA and 206CC of the Income Tax Act, 1961 are parallel sections which provide
for higher rates of TDS/TCS in case the deductee/party does not furnish PAN number. In
view of the same if the specified person additionally does not have a PAN , the TDS/TCS shall
be higher of the rates prescribed in 206AA/206CC or as per new sections 206AB/206CCA.
10. The amendment is applicable form 01st July, 2021.
11. A declaration may be obtained for the purposes of implementation of these sections the
following illustrative format from the parties whose TDS/TCS is Rs. 50,000/- or more:
For Internal Use Only
Illustrative Format of Declaration to be obtained from the deductee/party:
(The below format is illustrative and we may discuss it further if any more changes are
required to be made according to you.)
<<On Letter Head of the Dedcutee/Party>>
Declaration Form for not imposing higher TDS/TCS Rate u/s. 206AB or 206CCA of the
Income Tax Act, 1961:
To, Date:
[Name of the Entity/Person],
[Address].
1. Name of the Deductee/Party:
2. PAN of the Deductee/Party:
3. ITRs Filed:
F.Y ITR Filed (Yes/No) ITR Acknowledgement
Number
2018-19
2019-20
4. Whether total TDS/TCS for the FY 2018-19 and FY 2019-20 was Rs. 50,000 or more for
each year: Yes/No
5. The following are the details of TDS/TCS, if the Income Tax Return is not submitted are:
Year Aggregate of TDS deducted and TCS collected
2018-19 Rs.
2019-20 Rs.
I/We hereby confirm that the details mentioned above are true and correct and shall be
liable for any consequence arising out of the misdeclaration or wrong declaration in respect
of the information furnished herein above.
For ___________
Name:
Designation: Proprietor / Partner/ Director
Note: As per our understanding of the provisions we need to take a separate declaration
including FY 2020-21 after the due date of filing of return u/s. 139(1) has expired.
For Internal Use Only
Short Note on Section 194Q of the Income Tax Act, 1961 (Applicable from 01st July 2021):
1. Key-Points with respect to section 194Q:
a. It requires deduction of tax at source by a purchaser of goods whose turnover for FY
2020-21 has crossed Rs. 10 Crs.
b. The seller should be a resident of India.
c. TDS @ 0.1% shall apply if purchases from a seller exceeds Rs. 50 Lacs during a
financial year.
d. If a particular transaction qualifies for deduction of TDS u/s 194-Q, then the same
transaction shall not attract TCS u/s 206C(1H)
2. Illustrative Guide on Applicability:
Scenario Purchases before 01-07- Purchases on or after 01-07- Amount on which TDS shall
2021 2021 apply
(I) 60 L 20 L 20 L
(II) 20 L 40 L 10 L
(III) 70 L - -
(IV) - 60 L 10 L
3. Time of Deduction of TDS u/s 194Q
(i) At the time of credit of such sum to the account of the seller; or
(ii) At the time of payment thereof by any mode
Whichever is earlier.
4. The provisions of this section (194Q) shall not apply to a transaction on which—
(a) tax is deductible under any of the provisions of this Act; and
(b) tax is collectible under the provisions of section 206C other than a transaction to which
sub-section (1H) of section 206C applies.
5. As per section 206C(1H) 2nd provisio:
“that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at
source under any other provision of this Act on the goods purchased by him from the seller
and has deducted such amount.”
6. Therefore if on a transaction both TDS u/s 194-Q as well as TCS u/s 206C(1H) applies, then
TDS u/s 194-Q shall hold good and will be considered. Thus where tax is deducted by the
buyer under section 194Q no tax shall be collected under section 206C(1H) by the seller.
7. Section 194-Q Checkpoints for the buyer:
a. The buyer should have a valid "Tax Deduction & Collection Account Number" (TAN).
There is no requirement to obtain a fresh TAN if the buyer entity is already in
possession of an existing TAN.
b. Identify those domestic suppliers with whom transaction value is expected to
exceed Rs. 50 Lacs during FY 2021-22.
c. Check applicability of TDS u/s 194-Q with transactions from such domestic suppliers.
For Internal Use Only
d. Deduct TDS u/s 194-Q and deposit on or before due date.
e. File quarterly TDS return in Form No. 26Q.
f. Issue Form No. 16A to deductee-suppliers.
8. In our view, the sellers who were previously collection TCS u/s. 206C(1H) are required obtain
a declaration from buyer in the following format before discontinuing TCS u/s. 206C(1H) for
parties who are covered u/s. 194-Q in the following format:
<<Letter Head of the Buyer>>
To, Date:
[Name of the Entity/Person],
[Address].
We hereby confirm that we are responsible to deduct Tax u/s. 194Q of the Income
Tax Act, 1961 while making the payments to you.
Any liability on account of tax/interest/penalty arising due to non-compliance by us
will be recovered from us.
For ___________
Name:
Designation: Proprietor / Partner/ Director
