The Income Tax Department has provided a new functionality on its portal to help businesses in ensuring compliances related to the new norms for TDS (tax deducted at source) and TCS (tax collected at source) coming into effect from July 1.

The Finance Act 2021 has inserted section 206AB and 206 CCA in the Income Tax Act that prescribes special provision for deduction of tax at source for non-filers of income tax.

New sections

Now, the department has said that with the help of the new functionalities, one can carry out ‘Compliance Check for Sections 206AB and 206CCA’. New sections mandate tax deduction or tax collection at higher rate in case of ‘specified person’. Higher rate is twice the prescribed rate or 5 per cent or whichever is higher. A specified person is defined as one who has not filed returns for two years before the year in which tax is required to be deducted/collected, and whose aggregate of TDS/TCS is ₹50,0000 in each of these two previous years.

“It can be seen that the tax deductor or the tax collector is required to do due diligence of satisfying himself if the deductee or the collectee is a specified person. This can lead to extra compliance burden on such tax deductor or tax collector,” said the department.

Now, with the help of new functionality, the tax deductor or the collector can feed the single or multiple PAN of the deductee or collectee, and can get a response from the functionality if such deductee or collectee is a specified person.

For single search, response will be visible on the screen, which can be downloaded in the PDF format, while for bulk search, response will be available in a downloadable file.

According to Sandeep Jhunjhuwala, partner at Nangia Andersen, as per the logic of the functionality, the list of non-specified persons will get freezed at the beginning of the financial year. However, if a specified person files a valid return for the assessment year 2019-20 or 2020-21 during FY22, that name will be removed from the list.

“This could be ultra vires the I-T Act as the provisions of Section 206AB and Section 206CCA require the return to be filed within Section 139(1) timeline. Any return filed for AY20 or AY21 in FY22 would be a belated or revised return and would not be a 139(1) return and hence, such person may continue to remain a specified person,” he said.

Removal of names

Also, the removal of names from the specified person list is contemplated in a case of revision or belated filing of the TDS/ TCS. A reverse case could also be possible where such revision could lead to exceeding the ₹50,000 limit and a consequent inclusion of a non-specified person in the specified person list.

“With the I-T portal currently being fraught with multiple glitches, which are yet to be allayed, taxpayers aver that the workability of this functionality may turn out to be an after the Lord Mayor’s show,” said Jhunjhuwala.

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