Circular No. J.

CL of 2022

F. No. 370 I 33/3/2022-TPL

Subject: Circular regarding use of functionality under section 206AB and 206CCA of
the Income-tax Aci, 1961 - reg.
Finance Act, 202 1 in serted two new sections 206AB and 206CCA in the Income-tax
Act 1961 (hereinafter referred to as "the Act") whi ch took effect from 1st day of Jul y, 2021.
These sect ions (as they stood prior to its amendment by the Finance Act 2022) mandated tax
deduction (secti on 206AB) or tax collection (secti on 206CCA) at higher rate in case of
certa in non-filers (specified persons) with respect to tax deductions (other than under sections
192, I92A, 194B, 194BB, 194LBC and I 94N) and tax collections. Hi gher rate was twice the
prescribed rate or 5%, whichever is hi gher. Specified person meant a person who satisfies
both the following conditions: -

(i) He has not filed the returns o f income for both of the two assessment years
relevant to the two previous years immediate ly before the previous year in
which tax is req uired to be deducted/co llected. Two previous years to be
counted are required to be those whose return filing date under sub-section (I)
of section 139 has exp ired.
(ii) Aggregate of tax deducted at so urce and tax co llected at source is rupees fifty
thousand or more in each of these two previous years.

2. It ca n be seen th at the tax deductor or the tax co llector was req uired to do a due
diligence of satisfying him self if the deductee or th e co llectee was a specified person? In
order to ease thi s compliance burden the In come-tax Department came o ut with functionality
"Compliance Check for Section 206AB & 206CCA", which was made available through
reporti ng portal of the Income-tax Department. It enabled th e tax deductor or the collector to
feed the singl e PAN (PAN search) or multiple PANs (bu lk searc h) of the deductee or
co llectee. The functionality then gave a response if such cleductee or co llectee was a specified
person. For PAN Search, response was visible on the screen which could be downloaded in
the PDF format. For Bulk Search, response was in the form of downloadable file which could
be kept for record . Th logic of thi s functionality was explained th ro ugh paragraph 3 of
c ircular no II dated 2 1st June 2021.

3. Finance Act 2022 has brought abo ut the fo ll ow ing c hanges in the above mentioned
provision s, i.e., section 206AB and section 206CCA of the Act with effect from lSI April,
2022:
 (i) The prov ision of hi gher TDS under section 206AB is not a pplicable on tax to be
deducted under sections 194-I A, 194-IB and 194 M. This is in addition to a lready existing
provision of its non-appli cab i Iity on tax to be deducted under sections 192, 192A. 194B,
194B8, 194L B and 194N .

(ii) The definit fun of specified person has been amended in both section 206AB and
section 206CCA. Now "specified person" means a person who satisfies both the
following conditions:

(a) He has not furnished the return of income for the assessment year re levant to the
previous year immedi ately preceding the fin anc ial yea r in which tax is required to be
deducted/collected. T he previous year to be counted is requ ired to be the one whose
return filing date under sub-section ( I) o f section 139 has exp ired .

(b) Aggregate of tax deducted at source and tax co llected at source is rupees fifty
thousand or more in that previous year.

(i ii) Further. it has been provided that provisions of section 206AB will not apply in case
of deduction of tax on transfer of virtual digital asset (V DA ) under section 1945 of the
Act to a person being an individua l or Hindu undivided famil y, whose sa les, gross
receipts or turnover from the bus iness carri ed on by him or profession exercised by him
does not exceed one crore rupees in case of business or fifty lakh rupees in case of
profession, during the fin ancial yea r imm ediate ly precedin g the fin ancial year in which
such VDA is tra nsferred or if such person does not have any in come under the head
" Profit and gai ns of bu si ness or profession".

4, Thus it can be seen that now a person can become a spec ified person for default in one
year instead of earlier provision of de fa ult in two years. Accordingly the logic of the
functionality has been amended. The new logic for the current financial year is as under:

• A li st of specified person is prepared as on the sta rt of the fin anc ial year 2022-23 .
taking previous year 2020-2 1 as the relevant previous year. List contains names of the
taxpayers who did not fi Ie return of income fo r the assess ment y.ear 202 1-22 and have
aggregate of TDS and TCS of fifty thousand rupees or more in the previous yea r
2020-2 1.
• During the financial year 2022-23, no new names are added in the list of pec ified
persons. This is a taxpayer fr ie ndly measure to reduce the bu rden on tax deductor and
co llector of checking PANs of non-specified person more than once during the
finan c ia l year. •
• If any specified pe rson files a valid re turn of income (fi led & verified) for the
assessment year 202 1-22 during the financial year 2022-23, his name wo uld be
rem oved from the list of spec ified persons. T hi s would be done on the date of filing o f
the va lid return of income during the financial year 2022-23.
• If any spec ified person files a valid return of income (filed & verified) for the
assessment year 2022-23, hi s name would be removed from the li st of speci fi ed
persons. This would be done on the due datc for filin g of the return of income for A Y
 2022-23 or on the date of actual filing of valid return (filed & verified), whichever is
later.
• If the aggregate of TDS and TCS, in the case of a specified person, in the previo us
year 202 1-22 is less than fifty thousand rupees, his name would be removed from the
list of specified persons. This wo uld be done on the first due date under sub-section
( I) of section 139 of the Act falling in the finan cia l year 2022-23. For the financ ial
,
year 2022 -23 this due date is 31 " July 2022.
• Belated and revised TCS & TDS return s of the relevant financial year filed during the
financ ia l year 2022-23 wo uld a lso be cons idered fo r removing persons from the list of
speci fied persons on a regular basis.

5. The deductor or the co llector may c heck the PAN in the functionality at the beginning
of the financial year and then he is not required to check the PAN of non-specified person
during that financial year. To illustrate, let us assu me that a deductor has 10,000 vendors that
he deals w ith . He can use the functiona lity in the bulk search mode and can get the result o f
all these 10,000 PA Ns at one go. Let us ass ume that the functionality has shown that o ut o f
these 10,000 PA Ns, 5 PA Ns are specified persons for the purposes of sections 206AB and
206CCA of the Act. Now with respect of the remaining 9,995 PANs, it is c lear that they are
not in the li st of speci fi ed persons for that financial year. Since no new name would be added
in the list of specified persons during the fin anc ia l yea r, the deductor can be ass ured that these
9,995PANs would remain o utside the list of specified persons during that financial year.
Thus, deductor need not check again with respect to these 9,995 PANs during that financial
year. There are chances that the 5 PA Ns whi ch are of spcci fied persons may move out of the
li st during the finan cial year and for that there wi ll be need to recheck at the time of making
tax deduct io n o r tax co llection.

6. The li st would be drawn afresh at the start o f each financial year and the above
process would have to be repeated . For exa mple. at the beginning of the fin ancia l year 2023-
24 a fresh li st would be prepared with prev io us year 202 1-22 as the relevant previous year.
Then, no name would be added to the list of specified persons during the fin ancial year and
o nly name would be removed based o n the log ic give n in the 3'd to 6 th bullets of paragraph 4
above.

7. It may be noted that as per the provisos of Section 206AB & 206CCA , the specified
person shall not include a no n-resident who does not have a permanent establishment (PE) in
India. Since the functionality does not have the visibility of no n-res ide nt havi ng PE in India,
there is like lihood that no n-resident hav ing PE in India may not get re flected in thi s list. Tax
Deductors & Collectors are expected to carry out necessary due diligence in respect of non-
res idents about the applicability of sectio n 206AB and section 206CCA on them.

8. Ci rcular no II o f 202 1 was issued on 2 1" June 202 1. It was seen that even though thi s
user friendl y functionality has been provided to tax deducto rs/co llecto rs, and explai ned
thro ugh a ci rcul ar, some of these deductors/collectors were ask ing the deductee/collectee to
prod uce ev idences of thei r filin g of return of income. It may be again highlighted that this
functi o nality has been developed to ease compliance for tax deductors/collectors. Asking the
deductee/co llectee to file evidence o f furnishing of their relllrn defeat the purpose of thi s
taxpayer fri endly measure. All tax deductors/co llectors are requested to make note of thi s
c ircular for compliance.

9. C ircular no II of202 1 is modi fied to the extent of what is conta ined in thi s ci rc ular.

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A t Jain
Under Secretary (TPL)-IH
Copy to:
I. PS to FMJOSD to FM/ PS to MoS(F)/OSD to MoS(F)
2. PPS to Secretary (Revenue)
3. Chairman, CBDT and a ll Members, CBDT
4. All Pr. DGsIT/ Pr. CCs lT
5. All Jo int Secretaries! Cs IT/ Directors/ Deputy Secreta ries/ Under Secreta ries ofC BDT
6. The C&AG o f India
7. The JS and Lega l Adviser, Ministry of Law and Justice, New De lhi
8. C IT (M&TP), Offic ia l Spokesperson o f CBDT
9. % DG IT (Systems) for uploading on o ffi cia l website
10. JClT( Database Cell) for upl oading on www.irsofficersonline.gov.in