Section 206AB – Penalty For Not Filing ITR

Section 206AB specifies provisions for deduction of TDS at the higher rates for non-filers of the income tax returns in the previous two financial years for the “Specified Persons”. 

Meaning of specified persons

A specified person is an assessee who satisfies the following two conditions:

• He has not filed the income tax returns for two previous financial years immediately before the previous year in which tax is required to be deducted or collected. 
• The aggregate of tax deducted at source (TDS) and tax collected at source (TCS) of such specified person is INR 50,000 or more in each of these two previous years.

Therefore, we can say, to deduct TDS under section 206AB, the following conditions should be satisfied. 

Conditions for deducting TDS at a higher rate

In case the following conditions are met, you will have to deduct TDS as per Section 206AB at a higher rate:

• The assessee has not filed ITRs for two preceding years immediately before the preEvious year in which TDS is required to be deducted.
• The time limit for filing return has been expired.
• The aggregate total amount of TDS in each of these two preceding financial years is INR 50,000 or more.

Exception to section 206AB 

The provisions of section 206AB are not applicable, 

1. Where TDS is required to be deducted under sections:

• Section 192 – TDS on salary 
• Section 192A – TDS on the premature withdrawals of the EPF
• Section 194B – TDS on winning from Lottery/card games/puzzles
• Section 194BB – TDS on Winning from Horse Races 
• Section 194LBC – TDS Income in respect of investment in securitization trust
• Section 194N – TDS on Cash Withdrawal 

2. Where taxpayers are non-residents and do not have a permanent establishment in India

Compliance check facility to identify specified persons

The Income Tax Department has introduced a new functionality called ‘Compliance Check for Sections 206AB & 206CCA.’ 

You can access the functionality at reporting portal of the Income Tax Department, i.e., https://report.insight.gov.in/reporting-webapp/portal/homePage 

It helps you to identify whether the deductee or the collectee is a specified person or not. In these files, the list contains the name of taxpayers fulfilling both the conditions under section 206AB, i.e., taxpayers did not file the income tax returns for both the relevant assessment years and have an aggregate of TDS of INR 50,000 or more in each of these two previous years.

PAN Search

You can search it by using PAN and identity details. Further, you have the options to search with a single PAN or multiple PAN’s (bulk PAN search). In the case of a single PAN search, the portal will show the result in downloaded PDF format; on the other hand, for Bulk Search, the result would be in the form of a downloadable file.

The department will release the list of specified persons at the beginning of each financial year.

So, if your name appears in the specified person’s list, it means you haven’t filed income tax returns either for both of the previous two years or one of the years. Consequently, you are covered under section 206AB for getting deducted TDS at higher rates. 

Rate of TDS under section 206AB

The tax under section 206AB shall be deducted at the highest of:

• At the rate of five per cent.
• At twice the rate specified in the relevant provision of the Act.
• At twice the rate or rates in force; 

If the deductee doesn’t furnish PAN or PAN is not available, the TDS rate shall be @20% or rates applicable under this section, which is higher.