Latest Update on Sections 206AB & 206CCA of the Income Tax Act, 1961

📘Latest Update on Sections 206AB & 206CCA of the Income Tax Act, 1961

⚖️ Applicable from Financial Year 2025–26 (i.e., 1st April 2025)

🔷Background

• Section 206AB: Higher TDS for specified persons not filing income tax returns.

• Section 206CCA: Higher TCS for specified persons not filing income tax returns.

• These sections aimed to enforce tax compliance by imposing double or 5% TDS/TCS rates on non-filers.

❗ Key Amendment – Finance Act, 2025

• Sections 206AB and 206CCA have been omitted with effect from 1st April 2025.

• Applicable for all TDS/TCS transactions from FY 2025–26 onwards.

Particulars	Before (Up to 31 March 2025)	After (From 1 April 2025)
ITR Filing Check for TDS/TCS	Mandatory for certain deductees/collectees	Not required
Higher Rate for Non-Filers	2x rate or 5%, whichever is higher	No higher rate for non-filers
Compliance Burden on Deductors	High – had to verify ITR filing	Simplified – only PAN/Aadhaar to be checked
Relevant Sections	206AB & 206CCA	Omitted

🎯 Objective Behind Removal

• Ease of Doing Business: Reduces compliance complexities for deductors and collectors.

• Practical Challenges: Real-time ITR verification was difficult and led to operational hurdles.

• Shift Toward PAN-Based Compliance: Focus now moves to validated PAN/Aadhaar linkage and standard deduction.

✅ Practical Implications

• Businesses no longer need to identify or track non-filers for TDS/TCS purposes.

• Only ensure a valid PAN or Aadhaar is quoted for TDS/TCS transactions.

• Standard TDS/TCS rates will now apply uniformly.

📝 Summary

• From FY 2025–26, no higher TDS/TCS for non-filers under Sections 206AB & 206CCA.

• A welcome move for taxpayers and deductors alike.

• Simplifies tax deduction/collection process with less administrative effort.

This information is provided only for educational and general awareness purposes. It is not legal or financial advice, nor a substitute for professional consultation.