Circular regarding use of functionality under section 206AB and 206CCA of the Income-tax Aci, 1961

1. Finance Act, 2021 inserted two new sections 206AB and 206CCA in the Income-tax Act 196 1 (here in after referred to as “the Act”) which took effect from 1 st day of July, 202 1. These sections (as they stood prior to its amendment by the Finance Act 2022) mandated tax deduction (section 206AB) or tax collection (section 206CCA) at higher rate in case of certain non-filers (specified persons) with respect to tax deductions (other than under sections 192, I92A, 194B, 194BB, 194LBC and I 94N) and tax collections. Higher rate was twice the prescribed rate or 5%, whichever is higher. Specified person meant a person who satisfies both the following conditions: –
2. 1. (i) He has not fil ed the returns of income for both of the two assessment years relevant to the two previous years immediately before the previous year in which tax is required to be deducted/collected. Two previous years to be counted are required to be those whose return filing date under sub-section ( I) of section 139 has expired
   2. (ii) Aggregate of tax deducted at source and tax collected at source is rupees fifty thousand or more in each of these two previous years.

2. It can be seen that the tax deductor or the tax collector was required to do a due diligence of satisfying himself if the deductee or the collectee was a specified person? In order to ease this compliance burden the Income-tax Department came out with functionality “Compliance Check for Section 206AB & 206CCA”, which was made available through reporting portal of the Income-tax Department. It enabled the tax deductor or the collector to feed the single PAN (PAN search) or multiple PANs (bulk search) of the deductee or collectee. The functionality then gave a response if such deductee or collectee was a specified person. For PAN Search, response was visible on the screen which could be downloaded in the PDF format. For Bulk Search, response was in the form of downloadable file which could be kept for record. The’ logic of this functionality was explained through paragraph 3 of circular no II dated 2 1 S! June 2021.

3. Finance Act 2022 has brought about the following changes in the above mentioned provisions, i.e., section 206AB and section 206CCA of the Act with effect from 1st April, 2022:

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Circular : https://www.dropbox.com/s/bta20gx92k8sk96/Circular%20regarding%20use%20of%20functionality%20under%20section%20206AB%20and%20206CCA.pdf?dl=0