CBDT (Central Board of Direct Taxes) has issued a functionality to verify whether the Vendors have filed a tax return for compliance with Section 206AB and Section 206CCA. Section 206AB & section 206CCA inserted in the Income-tax Act, 1961 via Finance bill, 2021 will be effective from the 1st day of July 2021.
Section 206AB contains the special provisions for (TDS) deduction of tax at source for non-filers of the income tax return, whereas, section 206CCA provides for special provision for (TCS) collection of tax at source for non-filers of the income tax return.
According to the interpretation of the new sections, the tax deductor or the tax collector is required to do due diligence to check whether the deductee or the collectee is a specified person. This is a compliance burden on the part of such tax deductor or the tax collector.
Also Read: Section 206AB: TDS on Non Filers of ITR
To ease this compliance burden the CBDT has issued a new functionality called “Compliance Check for Sections 206AB & 206CCA”. Through this functionality, tax deductor or the collector can feed the single PAN (PAN search) or multiple PANs (bulk search) of the deductee or collectee and can get a response from the functionality if such deductee or collectee is a specified person or not.
This will now make compliance of Section 206AB and 206CCA much easier as it will be a one-time exercise of verification at the beginning of the year of all vendors. Now, no need to obtain any declaration from the Vendors. Below is the circular from the official Twitter handle of the Income Tax India:
CBDT issues Circular No. 11 of 2021 dt 21.06.2021 on implementation of section 206AB & 206CCA wrt higher tax deduction/collection for certain non-filers. New functionality issued for compliance checks for sec 206AB & 206CCA to ease compliance burden of tax deductors/collectors. pic.twitter.com/1DP39BKVZi
— Income Tax India (@IncomeTaxIndia) June 21, 2021
Specified person in context of section 206AB & 206CCA
The “Specified person” for the purpose of section 206AB & section 206CCA, means a person:
- Who has not filed the ITR for 2 previous years immediately prior to the previous year in which tax is required to be collected/deducted and
- The time limit of ITR filing under sub-section (1) of section 139 is expired and
- The aggregate TDS or TCS is Rs. 50,000 or more in each of the 2 previous years.
The facility of compliance check for Sections 206AB & 206CCA
Central Board of Direct Taxes is issuing a new functionality “Compliance Check for Sections 206AB & 206CCA”. This functionality is made available through the reporting portal of the Income-tax Department.
For PAN Search, the response will be visible on the screen which can be downloaded in PDF format. For Bulk Search, the response would be in the form of a downloadable file that can be kept for record.
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. The list would be drawn afresh at the start of each financial year.
As per circular no 11 issued today, the Deductor can verify from the income tax portal its vendor’s status of filing tax returns in the preceding 2 years. The department also clarified that the preceding 2 previous years for Financial Year 2021-22 shall mean Financial Year 2018-19 and Financial Year 2019-20.