Compliance Check for Section 206AB & 206CCA – CBDT Circular

To ease the compliance burden, CBDT (Central Board of Direct Taxes) vide Circular No. 11 of 2021 dated 21st June 2021, has announced a new functionality that will help Tax Deductor / Collectors to determine ‘Specified Persons’ for higher deduction / collection of tax under the new provisions of Sections 206AB and 206CCA of the Income Tax Act 1961. This is to be effective from 1st July 2021.

Who are the “Specified Person” for Financial Year 2021-22?

  • Person who has not filed their Income Tax Returns for the both years financial years, 2018-19 & 2019-20
  • The total aggregate of TDS & TCS credited is more than Rs. 50,000 in each of financial years, 2018-19 & 2019-20.

What is the Compliance Check Functionality?

This functionality is to be made available through the Reporting Portal of the Income-tax Department. The deductor / collector may check the PAN one at a time or in bulk. The response it to know if the person (PAN) is a ‘Specified Person’.

As per the notification, the IT Department will determine the list of ‘Specified Persons’ at the beginning of each financial year and during the course of the year, no new names will be added. However, existing names may be removed from the list, once corrective action has been taken by person concerned.

This implies that if a person is not in the list, he will remain out of the list throughout the financial year.

However, the list would be drawn afresh at the start of each financial year.

Example:

Let us suppose the deductor has 1000 vendors that he deals with. The deductor will use the functionality as bulk search mode to identify the Non-filers (Specified person) from the 1000 vendors at one go. Let’s say that the functionality identified 10 vendors (PAN No.) as specified person for the purpose of section 206AB & 206CCA. Now with the list of remaining 990 vendors, it is absolutely clear that they are not in the list of specified person for the financial year. Since no new name will be added in the list of specified person during the financial year, the deductor can be assured that the list of 990 vendors will remain outside of specified persons’ list, during the Financial Year. Hence, the deductor/collector do not have to check again through the list of 990 PANs during the same financial year. However, there are chances that the 10 PANs which are in the list of specified person, may move out from the list during the financial year, based on their act on TDS/TCS filing. For that, Deductor/collectors need to recheck throughout the financial year at the time of Deduction/Collection of Tax.

Click here to view the Original Circular

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