New TDS rule from next month: Income tax department issues new functionality for compliance checks

CBDT issues Circular No. 11 of 2021 dated 21.06.2021 on implementation of Section 206AB & 206CCA with reference to higher tax deduction/collection for certain Non-filers. Central Board of Direct Taxes has issued a functionality to verify whether the Vendors have filed a tax return for compliance of Section 206AB and Section 206CCA. Section 206AB & section 206CCA inserted in the Income-tax Act, 1961 via Finance bill, 2021 will be effective from 1^st July 2021.

Section 206AB contains the special provisions for (TDS) deduction of tax at source for Non-filers of the Income Tax Return, whereas, Section 206CCA provides for special provision for (TCS) collection of tax at source for Non-filers of the Income Tax Return. CBDT is issuing a new functionality “Compliance Check for Sections 206AB & 206CCA”. This functionality is made available through the reporting portal of the Income-tax Department.

As per Circular no. 11 issued on 21-06-2021, the deductor can verify from Income Tax Portal about its vendor’s status of filing a tax return in the preceding 2 years. Further, it has been clarified that the preceding 2 previous years for FY 2021-22 shall mean FY 2018-19 and FY 2019-20. The name of specified persons who have not filed tax returns uploaded at the beginning of the year by CBDT will be valid for the entire FY as no further addition will be made to this list. However deletion will be done by CBDT in case, any specified person in the list files its tax return. This will now make compliance of Section 206AB and 206CCA much easier as it will be a one-time exercise of verification at the beginning of the year of all vendors. No need now to obtain any declaration from the Vendors.

According to the interpretation of the new sections, the tax deductor or the tax collector is required to do due diligence to check whether the deductee or the collected is a specified person. This is a compliance burden on the part of such tax deductor or the tax collector. Below is the circular from the official Twitter handle of the Income Tax India: