The Central Board of Direct Taxes (CBDT) has issued income tax circular number 10/2022. The department has reported the rules to comply to use the functionality made to simplify the compliance for tax deductors/collectors (TDS/TCS) as mandated under Section 206AB and Section 206CCA of the Income-tax Act, 1961
Finance Act, 2021 inserted two new sections 206AB and 206CCA in the Income-tax Act 1961 which took effect from July 01, 2021. These sections make tax deduction (section 206AB) or tax collection (section 206CCA) important at a higher rate for the case of some non-filers (specified persons) with regard to tax deductions (excluding than under sections 192, 192A, 194B, 194BB, 194LBC and 194N) and tax collections.
The circular mentioned that now an individual could become a specified individual for default in 1 year rather than the former law which was the default in 2 years.
The deductor will verify the PAN card functionality at the start of the fiscal year and he is not needed to see the PAN of the non-specified individual in that fiscal year. To draw the same, a deductor has 10000 vendors that he deals with. He uses the functionality in bulk search mode and would obtain the result of all these 10,000 PANs. Let us consider that the functionality has shown that out of these 10,000 PANs, 5 PANs are specified persons for the purposes of sections 206AB and 206CCA of the Act.
Towards the left 9995 PANs, it is known that they are not on the list of the mentioned individual for that particular fiscal year. As no new name will be added to the list of the specified individual in the fiscal year, the deductor ensured that these 9995 PANs stay outside of that list in that fiscal year. There are chances that the 5 PANs which are of the mentioned individual might go out of the list in that fiscal year and for that, there shall be no requirement to recheck during that time of furnishing the tax deduction or tax collection.
Under the provisos of Section 206AB & 206CCA, the specified person would not include a non-resident who does not have a permanent establishment (PE) in India.
“Since the functionality does not have the visibility of non-residents having PE in India, there is the likelihood that non-residents having PE in India may not get reflected in this list. Tax Deductors & Collectors are expected to carry out necessary due diligence in respect of nonresidents about the applicability of section 206AB and section 206CCA on them, it added.”
Also, it mentioned that even though this user-friendly functionality has been given to TDS/TCS, and clarified through a circular, some of these deductors/collectors were asking the deductee/collected to give proof of their filing of income return.
“It may be again highlighted that this functionality has been developed to ease compliance for tax deductors/collectors. Asking the deductee/collect to file evidence of furnishing of their return defeats the purpose of this taxpayer-friendly measure. All tax deductors/collectors are requested to make note of this circular for compliance, the circular stated.”
