Category: Income Tax

CBDT Circular No. 10 of 2022 dated May 17, 2022

Subject; Circular regarding use of functionality under section 206AB and 206CCA of the Income-tax Act, 1961 – reg.

1. Finance Act, 2021 inserted two new sections 206AB and 206CCA in the Income-tax Act 1961 (hereinafter referred to as “the Act”) which took effect from 1st day of July 2021. These sections (as they stood prior to its amendment by the Finance Act 2022) mandated tax deduction (section 206AB) or tax collection (section 206CCA) at higher rate in case of certain non-filers (specified persons) with respect to tax deductions (other than under sections 192, 192A, 194B, 194BB, 194LBC and 194N) and tax collections. Higher rate was twice the prescribed rate or 5%, whichever is higher. Specified person meant a person who satisfies both the following conditions: –

(i) He has not filed the returns of income for both of the two assessment years relevant to the two previous years immediately before the previous year in which tax is required to be deducted/collected. Two previous years to be counted are required to be those whose return filing date under sub-section (1) of section 139 has expired.

(ii) Aggregate of tax deducted at source and tax collected at source is rupees fifty thousand or more in each of these two previous years.

2. It can be seen that the tax deductor or the tax collector was required to do a due diligence of satisfying himself if the deductee or the collectee was a specified person? In order to ease this compliance burden the Income-tax Department came out with functionality “Compliance Check for Section 206AB & 206CCA”, which was made available through reporting portal of the Income-tax Department. It enabled the tax deductor or the collector to feed the single PAN (PAN search) or multiple PANs (bulk search) of the deductee or collectee. The functionality then gave a response if such deductee or collectee 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. The’ logic of this functionality was explained through paragraph 3 of circular no 11 dated 21st June 2021.

3. Finance Act 2022 has brought about the following changes in the above mentioned provisions, i.e.. section 206AB and section 206CCA of the Act with effect from 1st April, 2022: (i) The provision of higher TDS under section 206AB is not applicable on tax to be deducted under sections 194-1A, 194-IB and 194M. This is in addition to already existing provision of its non-applicabilily on tax to be deducted under sections 192, 192A, 194B, 194BB, 194LBC and 194N. (ii) The definition 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 relevant to the previous year immediately preceding the financial year in which tax is required to be deducted/collected. The previous year to be counted is required to be the one whose return filing date under sub-section (I) of section 139 has expired.

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

(iii) 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 (VDA) under section 194S of the Act to a person being an individual or Hindu undivided family, whose sales, gross receipts or turnover from the business carried 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 financial year immediately preceding the financial year in which such VDA is transferred or if such person does not have any income under the head “Profit and gains of business or profession”.

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

– A list of specified persons is prepared as on the start of the financial year 2022-23. taking previous year 2020-21 as the relevant previous year. List contains names of the taxpayers who did not file return of income for the assessment year 2021 -22 and have aggregate of TDS and TCS of fifty thousand rupees or more in the previous year 2020-21.

– During the financial year 2022-23. no new names are added in the list of specified persons. This is a taxpayer friendly measure to reduce the burden on tax deductor and collector of checking PANs of non-specified person more than once during the financial year.

– If any specified person files a valid return of income (filed & verified) for the assessment year 2021-22 during the financial year 2022-23, his name would be removed from the list of specified persons. This would be done on the date of filing of the valid return of income during the financial year 2022-23.

– If any specified person files a valid return of income (filed & verified) for the assessment year 2022-23, his name would be removed from the list of specified persons. This would be done on the due date for filing of the return of income for AY 2022-23 or on the date of actual tiling of valid return (filed & verified), whichever is later.

– If the aggregate of TDS and TCS. in the case of a specified person, in the previous year 2021-22 is less than fifty thousand rupees, his name would be removed from the list of specified persons. This would be done on the first due date under sub-section (I) of section 139 of the Act falling in the financial year 2022-23. For the financial year 2022-23 this due date is 31st July 2022.

– Belated and revised TCS & TDS returns of the relevant financial year filed during the financial year 2022-23 would also be considered for removing persons from the list of specified persons on a regular basis.

5. The deductor or the collector may check 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 assume that a deductor has 10.000 vendors that he deals with. He can use the functionality in the bulk search mode and can get the result of all these 10.000 PANs at one go. Let us assume that the functionality has shown that out of these 10.000 PANs, 5 PANs 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 clear that they are not in the list of specified persons for that financial year. Since no new name would be added in the list of specified persons during the financial year, the deductor can be assured that these 9,995 PANs would remain outside 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 PANs which are of specified persons may move out of the list during the financial year and for that there will be need to recheek at the time of making tax deduction or tax collection.

6. The list would be drawn afresh at the start of each financial year and the above process would have to be repeated. For example, at the beginning of the financial year 2023-24 a fresh list would be prepared with previous year 2021-22 as the relevant previous year. Then, no name would be added to the list of specified persons during the financial year and only name would be removed based on the logic given in the 3rd to 6tj 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 non-resident who does not have a permanent establishment (PE) in India. Since the functionality does not have the visibility of non-resident having PE in India, there is likelihood that non-resident having PE in India may not get retlected in this list. Tax Deductors & Collectors are expected to carry out necessary due diligence in respect of non-residents about the applicability of section 206AB and section 206CCA on them.

8. Circular no 11 of 2021 was issued on 21st June 2021. It was seen that even though this user friendly functionality has been provided to tax deductors/collectors. and explained through a circular, some of these deduclors/collectors were asking the deductee/collectee to produce evidences of their filing of return of income. It may be again highlighted that this functionality has been developed to ease compliance for tax deductors/collectors. Asking the deductee/collectee to file evidence of furnishing of their return defeat the purpose of this taxpayer friendly measure. All tax deductors/collectors are requested to make note of this circular for compliance.

9. Circular no 11 of 2021 is modified to the extent of what is contained in this circular. [F .No. 370133/3/2022-TPL]

(Ankit Jain)
Under Secretary (TPL)-III

Dear Sir,

Please find below YouTube video link on *How to open Capital Gain A/c ? II Opening II Types II Interest rates II Withdrawal II Closer*

https://youtu.be/NRE61Gx0Ynk


Regards,
Bipul Kumar

The parameters for compulsory selection of return for complete scrutiny during FY 2022-23 and procedure for compulsory selection in such cases are prescribed as under:

These rules may be called the Income–tax (Fifteenth Amendment) Rules, 2022.

In the Income-tax Rules, 1962,––

(a) in rule 114, in sub-rule (3), after clause (vi), the following clause shall be inserted, namely:—

“(vii) in the case of a person who intends to enter into the transaction prescribed under clause (vii) of sub-section (1) of section 139A, at least seven days before the date on which he intends to enter into the said transaction.”;

(b) after rule 114B, the following rule shall be inserted, namely:―

“114BA. Transactions for the purposes of clause (vii) of sub-section (1) of section 139A.––

The following shall be the transactions for the purposes of clause (vii) of sub-section (1) of section 139A, namely:—

(a) cash deposit or deposits aggregating to twenty lakh rupees or more in a financial year, in one or more account of a person with a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act) or a Post Office;

(b) cash withdrawal or withdrawals aggregating to twenty lakh rupees or more in a financial year, in one or more account of a person with a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act) or a Post Office;

(c) opening of a current account or cash credit account by a person with a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act) or a Post Office.”;

(c) after rule 114BA, as so inserted by the Income-tax (Fifteenth Amendment) Rules, 2022, the following rule shall be inserted after the expiry of sixty days from the date on which this notification is published in the Official Gazette, namely:—

“114BB. Transactions for the purposes of sub-section (6A) of section 139A and prescribed person for the purposes of clause (ab) of Explanation to section 139A.–– (1) Every person shall, at the time of entering into a transaction specified in column (2) of the Table below, quote his permanent account number or Aadhaar number, as the case may be, in documents pertaining to such transaction, and every person specified in column (3) of the said Table, who receives such document, shall ensure that the said number has been duly quoted and authenticated—

The Central Board of Direct Taxes (CBDT) has issued the Income-tax (Twelfth Amendment) Rules, 2022 to further amend the Income-tax Rules, 1962 as follow:

• In rule 44E which specifies Application for obtaining an advance ruling, sub-rule (2) has been substituted, as follow:

“(2) The application referred to in sub-rule (1), the verification, the annexures and the statements and documents accompanying the annexures of the application, shall be sign and verify as under:

The person signing the application as specified in column 4 of above table holds a valid power of attorney to do so, which shall be attached to the application;

Further, FORM No. 34C, 34D, 34DA, 34E, 34EA which specifies Form of application for obtaining an advance ruling under section 245Q(1) of the Income-tax Act, 1961 has been substituted.

New Rule 12 AC inserted

1. Form, eligible person & Applicability year

“12AC. Updated return of income.- (1) The return of income to be furnished by any person, eligible to file such return under the sub-section (8A) of section 139, relating to the assessment year commencing on the 1 st day of April, 2020 and subsequent assessment years, shall be in the Form ITR-U and be verified in the manner indicated therein.

2. Manner of Filing

The return of income shall be furnished by a person by following specified manner :

1.Individual, or Hindu undivided family or a firm or limited liability partnership or an association of persons or a body of individuals, whether incorporated or not, or a local authority or an artificial juridical person in whose case accounts are required to be audited under section 44AB of the Act or a Company or a political party required to furnish a return in Form ITR-7.

Manner of furnishing return of income :- Electronically under digital signature.

2. Individual, or Hindu undivided family, or firm, or limited liability partnership, or an association of persons or a body of individuals, whether incorporated or not, or a local authority or an artificial juridical person, or a person required to file a return under sub-section (4A) or sub-section (4B) or sub-section (4C) or sub-section (4D) of section 139, other than a person mentioned above.

Manner of furnishing return of income :-

(A) Electronically under digital signature; (B) Transmitting the data electronically in the return under electronic verification code.

3. The Principal Director-General of Income-tax (Systems) or Director-General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing the return in the manners specified.
4. In the principal rules, in Appendix-II, after the ITR-Ack, the following Form ITR-U (ITR for updated return) shall be inserted, namely:—

Form ITR-U INDIAN INCOME TAX UPDATED RETURN

[For persons to update income within twenty-four months from the end of the relevant assessment year]

(Refer instructions for eligibility)

(Please see rule 12AC of the Income-tax Rules, 1962)

Form 26A : Form for furnishing accountant certificate under the first proviso to sub-section (1) of section 201 of the Income-tax Act, 1961

Form 27BA : Form for furnishing accountant certificate under first proviso to sub-section (6A) of section 206C of the Income-tax Act, 1961

Form 10BD : Statement of particulars to be filed by reporting person under clause (viii) of sub-section (5) of section 80G and clause (i) to sub-section (1A) of section 35 of the Income-tax Act, 1961

Form 10BE

Certificate of donation under clause (ix) of sub-section (5) of section 80G and under clause (ii) to sub-section (1A) of section 35 of the Income-tax Act, 1961

are available for filing on the portal.

Income Tax Return

👉 Income Tax Department enables e-filing of ITR-1, ITR-2 and ITR-4 for AY 2022-23;

👉 ITR-1 and ITR-4 can be filed using the online or offline utility

👉 ITR-2 can be filed only using the offline utility;

Taxpayers can download ITR Offline Utility through “Downloads” Menu option, fill and file the ITR through the same.

As per CBDT notification dated 21.04.2022, income tax return filing is mandatory for below mentioned persons:

1) Turnover of business exceeds Rs. 60 lakhs during Previous Years

2) Gross receipts in profession exceeds Rs. 10 lakhs during Previous Years

3) TDS and TCS of a person is or exceeds Rs. 25,000/- during Previous Years ; (Rs. 50, 000 for individual resident who has age of 60 years or more

4) Aggregate deposit in one or more SB account is Rs. 50 lakhs or more during Previous Years.

Applicable from 21.04.2022.