Budget 2025 removes of Higher TDS/TCS u/s Section 206AB & Section 206CCA for for Non-Filers of Income Tax Return
Among the key announcements in this year’s budget is the removal of higher Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) rates for non-filers of income tax returns under Section 206AB and Section 206CCA of the Income Tax Act, 1961
The Union Finance Minister Nirmala Sitharaman is presenting her record eighth Union Budget - 2025 in Parliament amid high hopes of tax relief. Delivering the first full budget of the Third Narendra Modi-government, Nirmala Sitharaman has become the only finance minister to present the Union Budget for eight consecutive times. Among the key announcements in this year’s budget is the...
The Union Finance Minister Nirmala Sitharaman is presenting her record eighth Union Budget - 2025 in Parliament amid high hopes of tax relief. Delivering the first full budget of the Third Narendra Modi-government, Nirmala Sitharaman has become the only finance minister to present the Union Budget for eight consecutive times.
Among the key announcements in this year’s budget is the removal of higher Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) rates for non-filers of income tax returns under Section 206AB and Section 206CCA of the Income Tax Act, 1961.
Section 206AB of the Act mandates a higher TDS rate for deductees who are non-filers of income tax returns, while Section 206CCA imposes a higher TCS rate for collectee’s in the same category. These provisions required deductors and collectors to apply a higher rate of twice the prescribed rate or 5%, whichever was higher, subject to certain conditions. Introduced in the Union Budget 2021, these sections aimed to encourage timely filing of income tax returns. However, they inadvertently increased the compliance burden on businesses and financial institutions.
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Representations from various stakeholders highlighted the challenges faced by deductors and collectors in verifying whether a deductee or collectee had filed their income tax returns. This often led to the application of higher TDS/TCS rates, blocking of capital, and increased compliance burdens. To address these issues and simplify the process, the Finance Minister proposed the omission of Sections 206AB and 206CCA in Budget 2025.
This move is expected to significantly reduce the compliance burden on deductors and collectors, particularly small businesses and individuals, who previously struggled with operational complexities and potential errors. The amendments will take effect from April 1, 2025, providing relief to taxpayers and businesses alike.
The decision reflects the government’s commitment to streamlining tax compliance and fostering a taxpayer-friendly environment. While the removal of these sections eases the burden on deductors, the government continues to emphasize the importance of tax compliance through other measures, including technology-driven tools and data analytics.
Overall, the removal of higher TDS/TCS rates for non-filers is a significant step towards reducing compliance burdens and promoting ease of doing business in India.
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