Section 206AB — Higher TDS for Non-Filers of ITR: Rate, Applicability & TRACES Check

Updated: 3 June 2026 | Effective 1 July 2021 | Section 206AB | Income-tax Act, 2025

Section 206AB mandates higher TDS for "specified persons" — those who have not filed ITR for both of the two immediately preceding financial years and whose aggregate TDS/TCS in each of those years exceeded ₹50,000. The higher rate = max(2 × normal rate, 5%). Introduced by Finance Act 2021, effective from 1 July 2021. Deductors must check payee status on the TRACES compliance portal before deducting TDS.

max(2×, 5%)

Section 206AB rate = higher of twice the normal TDS rate or 5%.
Applies to "specified persons": non-filers of ITR for 2 preceding years where TDS > ₹50K each year.

Who is a "Specified Person" Under Section 206AB?

A person is a specified person for a given financial year if all three of the following conditions are met:

Condition	Requirement
ITR filing — Year 1	ITR not filed for the financial year immediately preceding the current year (due date under Section 139(1) must have passed)
ITR filing — Year 2	ITR not filed for the financial year before that (i.e., both preceding years have no ITR)
TDS/TCS threshold — both years	Aggregate TDS + TCS in each of those two years exceeded ₹50,000

A person is NOT a specified person if they have filed ITR for at least one of the two preceding years. Persons who are non-residents without a PE in India are also excluded.

Section 206AB TDS Rate Examples

Normal TDS Section	Normal Rate	206AB Rate (max of 2×rate or 5%)
Section 194A — Bank interest	10%	20%
Section 194J — Professional fees	10%	20%
Section 194J — Technical services	2%	5%
Section 194C — Contractor (individual)	1%	5%
Section 194C — Contractor (company)	2%	5%
Section 194I — Rent (land & building)	10%	20%
Section 194H — Commission / brokerage	5%	10%
Section 194D — Insurance commission	5%	10%
Section 194M — Contract > ₹50L (individual payer)	5%	10%

Section 206AB vs Section 206CCA

Feature	Section 206AB	Section 206CCA
Applicable to	TDS (Tax Deducted at Source)	TCS (Tax Collected at Source)
Who acts	Deductor (payer)	Collector (seller)
Effective date	1 July 2021	1 July 2021
"Specified person" definition	Same — non-filer for 2 years, TDS > ₹50K each year	Same — non-filer for 2 years, TCS > ₹50K each year
Higher rate formula	max(2× normal rate, 5%)	max(2× normal rate, 5%)
TRACES check	Covered in same compliance portal	Covered in same compliance portal

Sections Excluded from Section 206AB

Section 206AB does not override TDS under the following sections:

Section	Nature of Payment	Reason for Exclusion
Section 192	Salary	Slab-based TDS; separate higher TDS mechanism
Section 192A	EPF withdrawal	Practical difficulty in identifying specified persons
Section 194B	Lottery / game winnings	One-time, anonymous payments
Section 194BB	Horse race winnings	One-time, anonymous payments
Section 194LBC	Securitisation trust income	Specific regime
Section 194N	Cash withdrawal from bank	Separate higher TDS framework
Payments to non-residents (no PE)	All types	Non-residents generally don't file Indian ITR

How to Check Section 206AB Status on TRACES

Step 1: Log in to the TRACES portal (traces.gov.in) with your deductor TAN and password.

Step 2: Navigate to Compliance Check → Section 206AB & 206CCA.

Step 3: Upload the list of payee PANs in the specified format (.txt or .xlsx) or search individually.

Step 4: Download the response file which shows "Specified Person: Yes/No" for each PAN.

Step 5: Deduct TDS at the higher rate (max of 2× normal or 5%) for all payees flagged as specified persons. Maintain this check as documentary evidence for your compliance records.

The TRACES portal is updated periodically. It is recommended to run a fresh check at the start of each financial year and before making large payments during the year.

Frequently Asked Questions

What is Section 206AB and when does it apply?

Section 206AB was introduced by the Finance Act 2021, effective from 1 July 2021. It requires any person making payments on which TDS is deductible to deduct TDS at a higher rate if the payee is a "specified person" — meaning a person who has not filed income tax returns for both of the two immediately preceding financial years, AND the aggregate TDS/TCS in each of those two years exceeded ₹50,000. The higher TDS rate under 206AB is the highest of: (a) twice the normal TDS rate applicable, (b) twice the rate or rates in force, or (c) 5% — whichever is highest.

What is the TDS rate under Section 206AB for a specified person?

The TDS rate under Section 206AB is the higher of: (1) twice the rate specified in the relevant TDS provision (e.g., 194C, 194J, 194A, etc.); or (2) twice the rate or rates in force; or (3) 5%. For example, if the normal 194J rate is 10%, Section 206AB rate = max(2×10%, 5%) = 20%. If the normal 194A rate is 10%, Section 206AB rate = 20%. If the 194C rate is 1%, Section 206AB rate = max(2%, 5%) = 5%. Section 206AB does not apply to salary (Section 192), EPF withdrawal (Section 192A), winning from lottery (Section 194B), horse race (Section 194BB), or to non-residents.

How to check if a person is a "specified person" under Section 206AB?

The Income Tax Department has provided a compliance check portal on TRACES (traces.gov.in) called the "Compliance Check for Section 206AB & 206CCA". Deductors can upload a list of PANs and check whether each payee is a specified person before making payments. The portal confirms Yes/No for each PAN. Deductors must conduct this check before each payment or at least at the start of the financial year. If a payee is flagged as a "specified person," higher TDS under 206AB must be deducted from all payments made during the year.

What is the difference between Section 206AB and Section 206CCA?

Section 206AB applies to TDS (Tax Deducted at Source) — i.e., tax deducted by the payer at the time of making payments to a payee. Section 206CCA applies to TCS (Tax Collected at Source) — i.e., tax collected by the seller at the time of receipt from a buyer. Both sections were introduced together (Finance Act 2021, effective 1 July 2021) and both apply to "specified persons" who have not filed ITR for 2 preceding years with TDS/TCS > ₹50,000 each year. The higher rate logic is the same: max(2×normal rate, 5%). The compliance check on TRACES covers both sections simultaneously.

Does Section 206AB apply to non-residents?

No. Section 206AB does not apply to a non-resident who does not have a Permanent Establishment (PE) in India. It also does not apply to payments covered under Sections 192 (salary), 192A (EPF withdrawal), 194B (lottery), 194BB (horse race), 194LBC (securitisation trust), and 194N (cash withdrawal). Since non-residents typically do not file Indian ITR (unless they have taxable Indian income), applying Section 206AB to them would be impractical — hence the specific exclusion. For resident payees, 206AB applies to virtually all TDS sections.

TDS Rate Chart 2025-26 TDS on Contractor (194C) TDS on Professional Fees (194J) Section 206C TCS File ITR

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