Income Tax: CBDT eases Compliance of TDS / TCS [Read Circular]

CBDT - Eases Compliance - TDS - TCS - taxscan

The Central Board of Direct Taxes (CBDT) has issued a circular prescribing the rules to follow to use the functionality developed to ease compliance for tax deductors/collectors as mandated under Section 206AB and Section 206CCA of the Income-tax Act, 1961 

Finance Act, 2021 inserted two new sections 206AB and 206CCA in the Income-tax Act 1961 which took effect from July 01, 2021. These sections mandated tax deduction (section 206AB) or tax collection (section 206CCA) at higher rate in case of certain non-filers (specified persons) with respect to tax deductions (other than under sections 192, 192A, 194B, 194BB, 194LBC and 194N) and tax collections.

The circular stated that now a person can become a specified person for default in one year instead of the earlier provision of default in two years.

“The deductor or the collector may check the PAN in the functionality at the beginning of the financial year and then he is not required to check the PAN of a non-specified person during that financial year. To illustrate, let us assume that a deductor has 10,000 vendors that he deals with. He can use the functionality in the bulk search mode and can get the result of all these 10,000 PANs in one go. Let us assume that the functionality has shown that out of these 10,000 PANs, 5 PANs are specified persons for the purposes of sections 206AB and 206CCA of the Act.”

“Now with respect to the remaining 9,995 PANs, it is clear that they are not on the list of specified persons for that financial year. Since no new name would be added to the list of specified persons during the financial year, the deductor can be assured that these 9,995 PANs would remain outside the list of specified persons during that financial year. Thus, the deductor need not check again with respect to these 9,995 PANs during that financial year. There are chances that the 5 PANs which are of specified persons may move out of the list during the financial year and for that, there will be a need to recheck at the time of making tax deduction or tax collection,” the circular said.

The circular further stated that as per the provisos of Section 206AB & 206CCA, the specified person shall not include a non-resident who does not have a permanent establishment (PE) in India.

“Since the functionality does not have the visibility of non-residents having PE in India, there is the likelihood that non-residents having PE in India may not get reflected in this list. Tax Deductors& Collectors are expected to carry out necessary due diligence in respect of nonresidents about the applicability of section 206AB and section 206CCA on them,” it added.

It further added that even though this user-friendly functionality has been provided to tax deductors/collectors, and explained through a circular, some of these deductors/collectors were asking the deductee/collectee to produce evidence of their filing of return of income.

“It may be again highlighted that this functionality has been developed to ease compliance for tax deductors/collectors. Asking the deductee/collectee to file evidence of furnishing of their return defeats the purpose of this taxpayer-friendly measure. All tax deductors/collectors are requested to make note of this circular for compliance,” the circular said.

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Case Number:   Circular No. 10 of 2022

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