Section 206AB has been omitted with effect from 1 April 2025 by the Finance Act 2025. For FY 2025-26 (AY 2026-27) onwards there is no higher TDS on ITR non-filers and no need to check "specified person" status. Until 31 March 2025 it required TDS at the higher of twice the normal rate or 5% on payees who had not filed ITR and whose TDS/TCS exceeded ₹50,000. Its TCS twin, Section 206CCA, was omitted on the same date.
From 1 April 2025 you no longer run the TRACES "specified person" check before deducting TDS. Deduct at the normal section rate (subject only to Section 206AA if PAN is missing/inoperative). This removes the capital-blocking and compliance burden that 206AB/206CCA created since July 2021.
What Changed — Before vs Now
The Finance Act 2025 omitted both Section 206AB (TDS) and Section 206CCA (TCS) because verifying a payee's return-filing status at the time of each deduction was hard, blocked capital and raised compliance cost. The change applies from 1 April 2025.
Old regime (1 Jul 2021 – 31 Mar 2025)
- Higher TDS on "specified persons" (ITR non-filers)
- Rate = higher of 2× normal rate or 5%
- Mandatory TRACES 206AB/206CCA check each year
- Capital blocked, extra compliance for deductors
New position (FY 2025-26 onwards)
- Section 206AB & 206CCA omitted — no higher rate
- Deduct at the normal section rate only
- No "specified person" / TRACES check needed
- Section 206AA (no-PAN) still applies separately
Still getting TDS deducted at 20% or need to file TDS returns correctly? Get it reviewed.
Talk to a TDS Expert →Who Was a “Specified Person”?
Section 206AB applied only to a specified person. From 1 April 2023 (Finance Act 2023) the test looked at one preceding year (originally two years under the Finance Act 2021). A payee was a specified person for FY 2024-25 if both conditions below were met:
| Condition | Requirement (FY 2024-25) |
|---|---|
| ITR not filed | ITR not filed for the immediately preceding year for which the Section 139(1) due date had expired |
| TDS/TCS threshold | Aggregate TDS + TCS in that year was ₹50,000 or more |
Never applied to non-residents without a PE in India. This entire test is redundant from 1 April 2025.
A payee was not a specified person if they had filed the ITR for that year, or their TDS/TCS was below ₹50,000. Salary and a few other sections were always outside 206AB (see the old-rates note below).
If you are correcting a TDS return, assessment or notice for any year up to 31 March 2025, Section 206AB applies for that period. The omission is prospective from FY 2025-26 — it does not undo higher TDS that was correctly deducted earlier.
How the Higher Rate Worked (till 31 Mar 2025)
The 206AB rate was the highest of: (a) twice the rate in the TDS section, (b) twice the rate in force, or (c) 5%. It never applied to Section 192 (salary), 192A, 194B, 194BB, 194LBC or 194N, nor to non-residents without a PE.
| Normal TDS Section | Normal Rate | Old 206AB Rate = max(2×, 5%) |
|---|---|---|
| 194A — Bank / other interest | 10% | 20% |
| 194J — Professional fees | 10% | 20% |
| 194J — Technical services | 2% | 5% |
| 194C — Contractor (individual/HUF) | 1% | 5% |
| 194C — Contractor (others) | 2% | 5% |
| 194I — Rent (land & building) | 10% | 20% |
| 194H — Commission / brokerage | 2% | 5% |
| 194Q — Purchase of goods | 0.1% | 5% |
194H was reduced to 2% from 1 Oct 2024, so its old 206AB rate = max(4%, 5%) = 5%. These rates are historical only — not applicable from FY 2025-26.
Old 194J fee to a non-filer
Now Same fee, FY 2025-26
Want your current TDS rates and returns handled correctly for FY 2025-26?
See the TDS Rate Chart →Section 206AB vs Section 206CCA
Both sections were introduced together (Finance Act 2021, effective 1 July 2021) and both were omitted together from 1 April 2025. The only difference was TDS versus TCS.
| Feature | Section 206AB | Section 206CCA |
|---|---|---|
| Applied to | TDS (tax deducted at source) | TCS (tax collected at source) |
| Who acted | Deductor (payer) | Collector (seller) |
| Introduced | 1 July 2021 | 1 July 2021 |
| Omitted from | 1 Apr 2025 | 1 Apr 2025 |
| Old higher rate | max(2× normal rate, 5%) | max(2× normal rate, 5%) |
What Deductors Do From FY 2025-26
- Stop running the TRACES 206AB/206CCA "specified person" check
- Deduct TDS at the normal section rate
- Apply Section 206AA only if PAN is missing or inoperative
- Keep 206AB records for past years (up to FY 2024-25) for assessments
- File TDS returns (26Q etc.) with the correct current rates
The TRACES Compliance Check for 206AB & 206CCA utility is no longer relevant for deductions from 1 April 2025. Only Section 206AA (higher TDS where the payee has no valid PAN) continues to apply.
206AA (no-PAN / inoperative-PAN higher TDS, usually 20%) is a different, still-active section. It was not omitted. If TDS is being deducted at 20% now, the reason is 206AA (PAN issue), not 206AB.
- Act & sections: incometax.gov.in
- Finance Act 2025 — omission of Sections 206AB & 206CCA, effective 1 April 2025
- Finance Act 2023 — specified-person test reduced from two years to one year (eff. 1 Apr 2023)
- Finance Act 2021 — introduced 206AB / 206CCA, effective 1 July 2021
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position with the official source before you act on it.