Section 206AB

[Ethirajan Parthasarathy]

Section 206AB of Income Tax Act provides for higher rate of TDS on payments to “Specified Persons”.

Definition of specified person spells out two cumulative conditions

The aggregate of TDS/TCS in the case of deductee concerned should be ₹ 50,000/- or more in each of the two assessment years relevant to the previous year in which tax is to be deducted. And

The deductee has not filed the ITR for both of those two assessment years referred to in condition (1) above.

Condition (1) is fairly simple. For AY 22-23, the deductor himself will have data for a particular deductee regarding quantum of tax deducted for AY 21-22 or 20-21 relating to two preceding previous year.

As regards condition (2), the due for filing ITR for AY 21-22 is extended upto 31/1/22.

My doubt is, till 31/1/22 are we to deduct tax at normal rate provided the deductee has filed his ITR for AY 20-21 and 19-20. And deduct higher rate of TDS from 1/2/22 provided the concerned deductee has not filed his ITR for AY 21-22 by 31/1/22.

I request expert to give their opinion on above points.

AI Summary

Higher TDS Rate Under Section 206AB Applies from 1/7/21 if Previous Two Years' ITRs Are Unfiled Section 206AB of the Income Tax Act mandates a higher TDS rate for payments to 'Specified Persons,' who meet two conditions: an aggregate TDS/TCS of 50,000 or more in each of the two assessment years prior to the tax deduction year, and non-filing of ITR for those years. A query was raised about whether to deduct tax at a normal rate until 31/1/22 if the deductee filed ITR for AY 20-21 and 19-20, and at a higher rate from 1/2/22 if not filed for AY 21-22. Responses indicated that the higher rate applies from 1/7/21 if returns for the previous two years are not filed.