TAX DEDUCTION

 

TAX DEDUCTION

TDS Rate

A deductor is required to deduct tax at source in accordance with the rates as specified in the relevant provision of the Income-tax Act (‘Act’) read with First Schedule to Finance Act. However, if PAN of the recipient is not intimated to the deductor, in view of Section 206AA, tax shall be deducted at source at higher of the following rates:

a) at the rate specified in the relevant provision of this Act; or

b) at the rate or rates in force; or

c) at the rate of 20%.

Further where any person located in a notified jurisdictional area is entitled to receive any sum or income or amount on which tax is subject to TDS, the tax shall be deducted in accordance with at the highest of the following rates:​

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a) at the rate or rates in force;

b) at the rate specified in the relevant provisions of this Act;

c) at the rate of 30%

Deduction of Tax at Higher Rate for non-filers of Return

The Finance Act, 2021 has inserted a new section 206AB for deduction of tax at higher rate if deductee failed to furnish return for specified period. This provision shall apply and the tax shall be deductible at the higher rates prescribed under this provision if the following conditions are satisfied:

a) Deductee has not filed the return of income for 2 assessment years relevant to the previous years immediately prior to the previous year in which tax is required to be deducted;

b) The due date to file such return of income, as prescribed under Section 139(1), has expired; and

c) The aggregate amount of tax deducted and collected at source is Rs. 50,000 or more in each of these 2 previous years.

The tax shall be deducted at the higher of the following rates:

a) Twice the rate specified in the relevant provision of the Act;

b) Twice the rate or rates in force; or

c) 5%.

Note 1: The provisions of section 206AB doesn’t apply to a non-resident who does not have a PE in India.

Note 2: If both the provisions of section 206AA and section 206AB are applicable, that is, deductee has neither furnished his PAN to the deductor nor has he furnished his return of income for the specified periods, the tax shall be deducted at the rates provided in section 206AA or section 206AB, whichever is higher.

Note 3: Tax is required to be deducted at higher rates under section 206AB in respect of every sum or income or amount from which tax is deductible under any provision of Chapter XVII-B except the sum or income or amount on which tax is deductible under any of the following provisions:

(a) Section 192: TDS on Salary;

(b) Section 192A: TDS on withdrawal from EPF;

(c) Section 194B: TDS on winning from lotteries, crossword puzzles, etc.

(d) Section 194BB: TDS on winning from racehorses;

(e) Section 194LBC: TDS on income in respect of investment in Securitization Trust;

(f) Section 194N: TDS on cash withdrawal.

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