Not filing Income Tax Return? You may have to pay double TDS from next month – Here’s why

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Updated: June 05, 2021 10:49 AM

New Tax Deducted At Source (TDS), TCS Rates for Non-filers from July 1: Higher TDS/TCS rate would be applicable for Income Tax Return (ITR) non-filers from July 1

income tax return, tdsRepresentative image

New Tax Deducted At Source (TDS), TCS Rates for Non-filers from July 1: Higher TDS/TCS rate would be applicable for Income Tax Return (ITR) non-filers from July 1, according to the Finance Act, 2021. The Finance Act has broadened the scope for collection of tax from the very source to ensure proper income reporting by every assessee.

With effect from July 1, 2021, a person will have to pay TDS at a higher TDS rate if he/she has not filed Income Tax Returns for the last two years and has aggregate TDS/TCS credit of Rs. 50,000 or more in each of the two years.

New TDS Rate

Under Section 206AB of the Income Tax Act 1961, the new TDS rate levied would be the highest of:

– Double the rate specified in the relevant provision of the Income Tax Act; or
– Double the rate of rates in force; or
– At the rate of five per cent.

For TCS collection, the rate under section 206CCA of the Act will be higher of: Double the rate specified in the relevant section; or 5 per cent.

ALSO READ | Income Tax Return: Know the key changes in ITR Forms, filing processes before you start

Where new rule will not apply

Section 206AB of the Act will not be applicable for TDS deducted under sections 192 (Salary); 192A (Payment of accumulated balance due to an employee); 194B (Winnings from lottery or crossword puzzles); 194BB (Winnings from horse race); 194LBC (Income from investment in securitization trust); and 194N (Cash withdrawals).

Section 206AB will also not be applicable to non-resident deductee/collectee, who do not have a permanent establishment in India.

If both section 206AA (higher TDS rate in case of no PAN) and section 206AB of the Act are applicable, then the TDS rate applicable will be higher of the TDS rates according to the aforesaid sections. Also, in the case of TCS, higher of TCS rates as per section 206CC and section 206CCA of the Act will be applicable.

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