A new income tax amendment under the Finance Act 2021, if a taxpayer has not filed Income tax return in the last two years and applicable TDS for him deducted each year exceeds of Rs 50,000, the Income Tax department will charge more while filing the income tax returns (ITR) from July 1st 2021.

“In Budget 2021, a new section 206AB under Income Tax Act,1961 was introduced to deduct TDS at a higher rate on cases with certain nature of income.

If the return of income not filed for the previous two years and TDS deducted in each year exceeds Rs 50,000 for a particular person, then the rate of TDS will be higher of the below limits :
a) Twice the rate specified under the relevant section/provision or
b) Twice the rate/rates in force or
c) Rate of 5%
Which Ever is Higher.

Example :
If a company pays a contractor Mr. A and it is liable to deduct 2% TDS on the payment to the contractor, it has to go and check on the portal whether contractor A has filed its last 2 ITRs or not.
If Mr. A has not filed last 2 ITRs and the total TDS deducted from A is more than Rs 50,000 in each Financial Year, then the company has to deduct twice the Tds rate (4%) or subject to maximum of 5% whichever is Higher.

The Income Tax Department has recently Launched a new ITR e-filing portal for taxpayers (www.incometax.gov.in). Hope this New portal may have new facility to check whether the person has filed earlier returns or not.

However, currently it is recommended to obtain a declaration from the respective vendors that they have filed the income tax returns for the previous Two Assessment Years.

However, the newly implemented Section 206AB will not be applicable for TDS deducted under:
• Section 192 – salary
• Section 192A – withdrawal from Provident Funds
• Section 194B or 194BB – TDS on winning from the card game, crossword, lottery, puzzle or any other games and horse race under
• Section 194N – It will not be applicable for TDS on cash withdrawal over Rs. 1 crore
• Section 194LBC – income against investment in the securitization trust

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