206AB Compliance Check Verify Tax Compliance Status

The Indian government recently introduced section 206AB in the Income Tax Act, 1961, to ensure that individuals and businesses comply with their tax obligations. This section applies to persons who have not filed their income tax returns or have filed them late, resulting in their names being added to the list of defaulters.

To help taxpayers check their compliance status under section 206AB, the government has introduced an online tool called the 206AB Compliance Check. This tool allows taxpayers to verify their compliance status and avoid being subjected to higher TDS (Tax Deduction at Source) rates.

To use the 206AB Compliance Check tool, taxpayers need to enter their PAN (Permanent Account Number) and assessment year. The tool will then generate a report that indicates whether the taxpayer is compliant or non-compliant under section 206AB.

If the taxpayer is compliant, the tool will display a message stating that the taxpayer is compliant under section 206AB and will not be subject to higher TDS rates. However, if the taxpayer is non-compliant, the tool will display a message stating that the taxpayer is non-compliant under section 206AB and will be subject to higher TDS rates.

It is important to note that the 206AB Compliance Check tool only checks compliance status under section 206AB and not under other sections of the Income Tax Act. Taxpayers should also ensure that they have filed their income tax returns and paid any taxes due to avoid being non-compliant under other sections of the Income Tax Act.

Taxpayers who are non-compliant under section 206AB will be subject to higher TDS rates on certain payments made to them. The TDS rate under section 206AB is twice the rate specified in the relevant provision of the Income Tax Act or twice the rate specified in the relevant tax treaty, whichever is higher.

For example, if the TDS rate specified in the relevant provision of the Income Tax Act is 10%, the TDS rate under section 206AB will be 20%. Similarly, if the TDS rate specified in the relevant tax treaty is 15%, the TDS rate under section 206AB will be 30%.

Taxpayers who are non-compliant under section 206AB can rectify their non-compliance by filing their income tax returns and paying any taxes due. Once the non-compliance is rectified, taxpayers can use the 206AB Compliance Check tool to verify their compliance status under section 206AB.

In conclusion, the 206AB Compliance Check tool is an important tool for taxpayers to verify their compliance status under section 206AB and avoid being subjected to higher TDS rates. Taxpayers should ensure that they have filed their income tax returns and paid any taxes due to avoid being non-compliant under section 206AB and other sections of the Income Tax Act.

The compliance check tool will display the compliance status of the person or entity, i.e., whether they are subject to higher TDS/TCS under Section 206AB or not. If they are subject to higher TDS/TCS, the tool will also display the applicable rate of TDS/TCS.

Section 206AB of the Income Tax Act, 1961, mandates a higher rate of tax deduction at source (TDS) or tax collection at source (TCS) for non-filers of income tax returns or those who have not filed their income tax returns within the specified time. This provision is applicable from July 1, 2021.

The compliance under Section 206AB is determined based on the filing of income tax returns by the person or entity. If a person or entity has not filed their income tax return for the previous two years, and the total tax deducted or collected at source exceeds Rs. 50,000 in each of those two years, then they will be subject to higher TDS/TCS under Section 206AB.

The rate of TDS/TCS under Section 206AB is higher of the following:

Twice the rate specified in the relevant provision of the Income Tax Act, or

Twice the rate or rates in force, or

The rate of 5%

It is important for deductors and collectors to check the compliance status of the person or entity before deducting or collecting TDS/TCS. The compliance status can be checked using the compliance check tool provided on the official Income Tax e-filing portal. If the compliance status shows that the person or entity is subject to higher TDS/TCS under Section 206AB, then the TDS/TCS should be deducted/collected at the higher rate as per the provisions of Section 206AB.