Pay Double TDS/TCS From July 1, If You Haven’t Done This (New Income Tax Rules)

Pay Double TDS/TCS From July 1, If You Haven’t Done This (New Income Tax Rules)

For those who haven’t filed Income Tax Returns (ITR) yet, it is high time to do so since if you do it after July 1 then it would attract a higher TDS/TCS rate, as per the Finance Act, 2021.

Why Would This Happen?

To ensure that correct income is reported by every assessee,  the Finance Act has revamped the scope of tax collection from the very source.

So now, from July 1, a person will be forced to pay extra TDS and that too at a higher rate if he/she fails to file their Income Tax Returns for the last two years and has aggregate TDS/TCS credit of Rs. 50,000 or more in each of the two years.

New Income Tax Law

According to the Section 206AB of the Income Tax Act 1961, the new TDS rate levied would be the highest of below scenarios.

  1. Double the rate specified in the relevant provision of the Income Tax Act or
  2. Double the rate of rates in force  or
  3. At the rate of five percent.

 At the sametime, for TCS collection, the rate under section 206 CCA of the Act will be higher.

Basically, it will be double the rate mentioned in the relevant section; or 5 percent.

Exceptions For New Rules

The section 206AB of the Act will not be useful for TDS deduction under sections 192 (Salary); 192A (Payment of accumulated balance due to an employee); 194B (Winnings from lottery or crossword puzzles); 194BB (Winnings from horse race); 194LBC (Income from investment in securitization trust); and 194N (Cash withdrawals).

It will also not be applicable to non-resident deductee/collectee, who doesn’t have a permanent establishment in India.

In cases if both the section 206AA (higher TDS rate in case of no PAN) and section 206AB of the Act are applicable then the TDS rate will be much higher than the TDS rates according to the aforesaid sections.

Source:-trak

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