The Central Board of Direct Taxes (CBDT) has extended the deadline for submitting income tax returns for the fiscal year 2021. The deadline for submitting TDS for the fourth quarter of the fiscal year 2020-21 has been extended to June 30. As a result, the deadline for submitting Form 16 has been pushed from June 15 to July 15. But if you are a taxpayer, then you may have to pay higher TDS from July. According to Finance Act 2021, if a taxpayer has not paid TDS in the previous two years and the TDS deducted each year surpasses Rs 50,000, the Income Tax Department will impose a higher rate while submitting income tax returns (ITR) beginning from July 1, 2021.
A new section 206AB was inserted in Budget 2021 to collect TDS at a higher or double rate on some types of income if the declaration of income was not submitted for the preceding two years and TDS withheld in each year surpasses Rs 50,000. To penalise individuals who neglected to submit income tax returns, the government announced new Sections 206AB and 206CCA under the Income Tax Act. This TDS clause specifies a higher rate of tax deduction for certain individuals. According to the Section 206AB, the TDS shall be deducted at a higher rate if:
- A taxpayer has not filed income tax returns for the last 2 years
- The deadline for filing the IT return under section 139(1) has passed.
- If the total aggregate tax deducted or collected at source of the taxpayer in each of the preceding two years surpasses Rs 50,000.
TDS rates applicable
- Twice the rate stated in the applicable section.
- Twice the rate or rates in force; or
- At a rate of 5%.
- According to the new Section 206AB, the tax shall be deducted at the higher of the two rates provided in this section and in Section 206AA. The rate for TCS collection under section 206CCA of the Act will be 5% higher than the rate stated in the relevant provision.
Exceptions under Section 206AB
Section 206AB will not apply to TDS deducted under Section 192 for salary or withdrawals from Provident Funds under Section 192A. TDS on profits from card games, crossword puzzle, lottery, horse race or any other games under Provision 194B or 194BB will also be exempted from the new provision.
It would not apply to TDS on cash withdrawals exceeding Rs 1 crore under Section 194N or income from investments in securitisation trust under Section 194LBC. Non-resident i.e. deductee or collectee who do not have a permanent establishment across India would also be exempted from Section 206AB.