Section 206AB of the Income Tax Act is recently introduced vide the Finance Act, 2021. Section 206AB mandates the person to deduct TDS in case of non-filing of an income tax return by the specified person.
Provision of section 206AB of the Income Tax Act–
Proposed section 206AB of the Act would apply on any sum or income or amount paid, or payable or credited, by a person (herein referred to as deductee) to a specified person.
Meaning of the term ‘Specified Person’ for Section 206AB
The term ‘specified person’ includes the person who satisfies all the following criteria-
1. The person has not filed income tax return of two previous years immediately before the previous year in which TDS is required to be deducted;
2. The time limit of filing of an income tax return as per section 139(1) is expired; and
3. The total TDS and TCS is INR 50,000 or more in each of the two previous years.
Provided that the specified person shall not include a nonresident who does not have a permanent establishment in India.
Non Applicability of 206AB
This section shall not apply where the tax is required to be deducted under sections 192, 192A, 194B, 194BB, 194LBC or 194N of the Act.
| Sr. No. | Section | Description |
| 1 | Section 192 | Salary |
| 2 | Section 192A | Premature withdrawal from the accumulated balance of Provident Fund which is taxable in the employee’s hands. |
| 3 | Section 194B | Winning from the card game, crossword, lottery, puzzle or any other games. |
| 4 | Section 194BB | Winning from horse race. |
| 5 | Section 194LBC | Income against investment in the securitization trust. |
| 6 | Section 194N | Payments of certain amount/ amounts in cash. |
Rate of TDS under section 206AB
TDS under section 206AB will be deducted at higher of the following rates-
- Twice the rate as specified under the relevant provision of the Income Tax Act; or
- Twice the rate/ rates in force; or
- At the rate of 5%.
Effective date of section 206AB
The newly inserted provisions of section 206AB of the Income Tax Act will be effective from 1st July 2021.
Applicability of both section 206AA and 206AB-
Section 206AA of the Income Tax Act mandates the person to deduct TDS at higher rates in case of non-availability of PAN.
Now, in case both the provisions of section 206AA and section 206AB applies to the ‘specified person’. Then, TDS would be deducted at the higher of the two rates prescribed under section 206AA and section 206AB.