Section 206AB of the income tax act which will be effective from 01.07.2021

A new section 206AB in the income tax Act has been introduced which will be effective from 01.07.2021 - as a special provision providing for higher rate of TDS for the non filers of income tax return.
This section impose a higher rate of TDS if the transactions are done with the non filers of income tax return.
Applicability of section 206AB:
 Deductor will deduct TDS at a higher rate on any amount paid to the specified person
Following are the specified persons as per section 206AB:

• Person who has not filed income tax return for 2 Years immediately before the previous year in which tax is required to be deducted
• Time limit of ITR filing under section 139(1) is expired
• The aggregate of TDS is Rs. 50000 or more in each of the 2 previous years

Specified person does not include non resident who does not have a permanent establishment in India
 
 
Non applicability of section 206AB:
Provision of this section shall not be applicable for such type of transactions where full amount of tax is required to be deducted

• Salary
• Premature withdrawal from employee provident fund
• Winning from lottery, cross word puzzles or card games
• Winning from any horse races
• Income from investment in securitization trust
• TDS on cash withdrawal above Rs. 1 crore

Rate of TDS to be deducted under section 206AB:

• at twice the rate specified in the relevant provison of the act
• twice the rate or rates in force
• at the rate of 5%

What if PAN is not furnished:

• If specified person does not furnish a PAN to the payer than the TDS rate shall be higher of the rate mentioned above or 20%