As per the provisions of the Income Tax Act, there are various provisions that have been introduced to ensure timely and accurate tax compliance. One such provision is Section 206CH of the Income Tax Act. This section has been introduced to ensure that certain specified taxpayers, who have not filed their income tax returns for the previous two years, are liable to pay higher TDS and TCS rates on certain transactions. In this blog, we will discuss the key aspects of Section 206CH of the Income Tax Act.
What is Section 206CH of the Income Tax Act?
Section 206CH of the Income Tax Act was introduced by the Finance Act, 2021, with effect from 1st July 2021. This section applies to specified persons who have not filed their income tax returns for the previous two years and whose aggregate TDS and TCS liability exceeds Rs. 50,000 in each of those two years.
Who are the specified persons under Section 206CH?
The specified persons under Section 206CH are those whose aggregate TDS and TCS liability exceeds Rs. 50,000 in each of the previous two years and have not filed their income tax returns for those years. The term “specified person” includes:
- A person who is liable to deduct TDS (tax deducted at source) under Section 194C, 194H, 194I, 194J, 196C or 206C of the Income Tax Act.
- A person who is liable to collect TCS (tax collected at source) under Section 206C of the Income Tax Act.
What are the consequences of non-compliance with Section 206CH?
If a specified person fails to comply with the provisions of Section 206CH, he shall be liable to pay a higher rate of TDS or TCS on specified transactions. The higher rate of TDS or TCS shall be twice the rate specified in the relevant provision of the Income Tax Act or twice the rate in force, whichever is higher. The higher rate of TDS or TCS shall apply until the specified person files his income tax returns for the previous two years.
What are the specified transactions under Section 206CH?
The specified transactions under Section 206CH are as follows:
- Payment for contracts
- Payment for professional services
- Payment for rent
- Payment for brokerage or commission
- Payment for dividend
- Payment for interest other than interest on securities
- Payment for royalty
- Payment for technical services
- Sale of goods (excluding export of goods)
Conclusion
Section 206CH of the Income Tax Act has been introduced to ensure timely and accurate tax compliance by specified persons who have not filed their income tax returns for the previous two years. The consequences of non-compliance with this section can be severe as it results in a higher rate of TDS or TCS on specified transactions. Therefore, it is essential for specified persons to comply with the provisions of Section 206CH to avoid any adverse consequences.
Read more useful content:
- section 234e of income tax act
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Frequently Asked Questions (FAQs)
Q. What is Section 206CH of the Income Tax Act?
A. Section 206CH of the Income Tax Act was introduced by the Finance Act, 2021, to ensure timely and accurate tax compliance by specified persons who have not filed their income tax returns for the previous two years.
Q. Who are the specified persons under Section 206CH?
A. The specified persons under Section 206CH are those whose aggregate TDS and TCS liability exceeds Rs. 50,000 in each of the previous two years and have not filed their income tax returns for those years. It includes persons who are liable to deduct TDS under Section 194C, 194H, 194I, 194J, 196C or 206C, and persons who are liable to collect TCS under Section 206C of the Income Tax Act.
Q. What is the consequence of non-compliance with Section 206CH?
A. If a specified person fails to comply with the provisions of Section 206CH, he shall be liable to pay a higher rate of TDS or TCS on specified transactions. The higher rate of TDS or TCS shall be twice the rate specified in the relevant provision of the Income Tax Act or twice the rate in force, whichever is higher.
Q. What are the specified transactions under Section 206CH?
A. The specified transactions under Section 206CH include payment for contracts, professional services, rent, brokerage or commission, dividend, interest other than interest on securities, royalty, technical services, and sale of goods (excluding export of goods).
Q. What is the rate of higher TDS or TCS under Section 206CH?
A. The higher rate of TDS or TCS under Section 206CH shall be twice the rate specified in the relevant provision of the Income Tax Act or twice the rate in force, whichever is higher.
Q. How long will the higher rate of TDS or TCS apply?
A. The higher rate of TDS or TCS shall apply until the specified person files his income tax returns for the previous two years.
Q. Can a person who has filed income tax returns for the previous two years be a specified person under Section 206CH?
A. No, a person who has filed income tax returns for the previous two years cannot be a specified person under Section 206CH, even if his aggregate TDS and TCS liability exceeds Rs. 50,000 in each of those years.
Q. When does Section 206CH come into effect?
A. Section 206CH of the Income Tax Act came into effect from 1st July 2021.
