2 min
05 April 2025
The Income Tax Department of India has been making continuous efforts to track down tax evaders and improve overall tax compliance. One such major step was the introduction of Section 206AB in the Finance Act 2021. This section targets non-filers of income tax returns by imposing higher rates of Tax Deducted at Source (TDS).
Section 206AB creates a strong deterrent for taxpayers who ignore their filing obligations. It ensures that those who fail to file their income tax returns face higher tax deductions at source. This provision aims to push taxpayers towards compliance by making non-compliance financially burdensome.
For honest taxpayers, Section 206AB has minimal impact. But for those who neglect their tax filing duties, it can mean paying significantly more tax upfront. The higher TDS rates under Section 206AB can range from 5% to double the normal rates, depending on the nature of the payment.
This article will explore Section 206AB in detail, explaining its scope, application, and impact on various stakeholders. We will also look at how staying compliant helps you avoid these higher rates and manage your finances better, including when planning major investments like home purchases.
What is Section 206AB of Income Tax Act?
Section 206AB was introduced in the Finance Act 2021 and came into effect from July 1, 2021. This section was created to deal with non-filers of income tax returns by imposing higher TDS rates.
The main purpose of Section 206AB is to ensure better tax compliance. It targets taxpayers who have consistently failed to file their income tax returns for the past two assessment years. These taxpayers face higher TDS rates on various payments they receive.
Under Section 206AB, the tax deductor must verify if the recipient is a "specified person" before making any payment. If the recipient falls under this category, the deductor must apply a higher rate of TDS than what is normally applicable.
This section applies to most payments that are subject to TDS under various provisions of the Income Tax Act. The higher rate under Section 206AB is either twice the rate specified in the relevant section or 5%, whichever is higher.
Are you planning major financial decisions while navigating tax complexities? Check your eligibility for a Bajaj Housing Finance Home Loan by entering your mobile number and OTP. You may already be eligible for attractive home loan options that can help you manage your finances better.
How is TDS deducted under section 206AB?
Under Section 206AB, the TDS deduction process follows specific rules designed to ensure higher tax collection from non-compliant taxpayers.
When making payments to a "specified person" (a non-compliant taxpayer), the deductor must apply TDS at whichever is higher: twice the normal rate or 5%. For example, if the normal TDS rate is 2%, the rate under Section 206AB would be 5% (as it is higher than 4%, which is twice the normal rate).
The deductor needs to verify the status of the recipient before making the payment. The Income Tax Department provides an online facility called "Compliance Check for Sections 206AB & 206CCA" to help deductors verify if a recipient is a specified person.
This verification must be done at the beginning of each financial year or before making the first payment in a financial year. The results of this verification can be relied upon for all subsequent payments during that financial year.
How is TCS collected under section 206AB?
While Section 206AB primarily deals with TDS (Tax Deducted at Source), it has a companion provision called Section 206CCA that applies the same principles to TCS (Tax Collected at Source).
Section 206CCA imposes higher TCS rates on specified persons who have not filed their income tax returns. The TCS is collected at the higher of twice the applicable rate or 5%.
Just like with TDS, the collector needs to verify if the buyer is a specified person. The same online compliance check facility can be used for this verification.
The higher TCS rates apply to transactions like sale of goods, provision of services, and other activities that normally attract TCS under the Income Tax Act.
Who is the specified person U/S Section 206AB?
A "specified person" under Section 206AB refers to a taxpayer who meets specific non-compliance criteria. Understanding this definition is crucial for both deductors and taxpayers.
A person is considered a "specified person" if they have not filed income tax returns for the past two assessment years immediately preceding the year in which tax is to be deducted. Additionally, the time limit for filing the return under section 139(1) must have expired for both years.
The person must also have been subject to TDS and TCS of Rs. 50,000 or more in each of these two previous years to be classified as a specified person.
It is important to note that non-resident taxpayers who do not have a permanent establishment in India are not considered specified persons under this section. The status of being a specified person is determined at the beginning of each financial year based on the compliance status of the previous years.
What are the exclusions under Section 206AB?
Section 206AB does not apply universally to all payments. Several important exclusions exist where normal TDS rates continue to apply regardless of the recipient's compliance status.
The key exclusions under Section 206AB include payments that attract TDS under:
These exclusions ensure that certain essential or specific payments remain unaffected by the higher TDS rates, even if the recipient is a non-filer.
Wondering how to manage your finances better while staying tax-compliant? Check your eligibility for a Bajaj Housing Finance Home Loan today. You might already qualify for competitive interest rates - find out by entering your mobile number and OTP.
How to apply for Bajaj Finserv Home Loan
Applying for a Bajaj Housing Finance Home Loan is a straightforward process designed for convenience and speed. Here's how you can apply:
Eligibility criteria to get home loan from Bajaj Finserv
Understanding the eligibility criteria for a Bajaj Housing Finance Home Loan helps you prepare better for your application. Here are the key requirements:
Managing tax compliance while planning major financial commitments like buying a home requires careful consideration. Section 206AB serves as a reminder of the importance of staying compliant with tax filing obligations to avoid higher TDS rates.
Bajaj Housing Finance Home Loan offers a comprehensive solution for your home financing needs with several standout features:
Whether you're a first-time homebuyer or looking to upgrade your existing property, checking your eligibility for a Bajaj Housing Finance Home Loan is the first step toward making your dream home a reality. Enter your mobile number and complete the OTP verification to explore loan options tailored to your needs.
*Terms and conditions apply
Check also:
Section 206AB creates a strong deterrent for taxpayers who ignore their filing obligations. It ensures that those who fail to file their income tax returns face higher tax deductions at source. This provision aims to push taxpayers towards compliance by making non-compliance financially burdensome.
For honest taxpayers, Section 206AB has minimal impact. But for those who neglect their tax filing duties, it can mean paying significantly more tax upfront. The higher TDS rates under Section 206AB can range from 5% to double the normal rates, depending on the nature of the payment.
This article will explore Section 206AB in detail, explaining its scope, application, and impact on various stakeholders. We will also look at how staying compliant helps you avoid these higher rates and manage your finances better, including when planning major investments like home purchases.
What is Section 206AB of Income Tax Act?
Section 206AB was introduced in the Finance Act 2021 and came into effect from July 1, 2021. This section was created to deal with non-filers of income tax returns by imposing higher TDS rates.
The main purpose of Section 206AB is to ensure better tax compliance. It targets taxpayers who have consistently failed to file their income tax returns for the past two assessment years. These taxpayers face higher TDS rates on various payments they receive.
Under Section 206AB, the tax deductor must verify if the recipient is a "specified person" before making any payment. If the recipient falls under this category, the deductor must apply a higher rate of TDS than what is normally applicable.
This section applies to most payments that are subject to TDS under various provisions of the Income Tax Act. The higher rate under Section 206AB is either twice the rate specified in the relevant section or 5%, whichever is higher.
Are you planning major financial decisions while navigating tax complexities? Check your eligibility for a Bajaj Housing Finance Home Loan by entering your mobile number and OTP. You may already be eligible for attractive home loan options that can help you manage your finances better.
How is TDS deducted under section 206AB?
Under Section 206AB, the TDS deduction process follows specific rules designed to ensure higher tax collection from non-compliant taxpayers.
When making payments to a "specified person" (a non-compliant taxpayer), the deductor must apply TDS at whichever is higher: twice the normal rate or 5%. For example, if the normal TDS rate is 2%, the rate under Section 206AB would be 5% (as it is higher than 4%, which is twice the normal rate).
The deductor needs to verify the status of the recipient before making the payment. The Income Tax Department provides an online facility called "Compliance Check for Sections 206AB & 206CCA" to help deductors verify if a recipient is a specified person.
This verification must be done at the beginning of each financial year or before making the first payment in a financial year. The results of this verification can be relied upon for all subsequent payments during that financial year.
How is TCS collected under section 206AB?
While Section 206AB primarily deals with TDS (Tax Deducted at Source), it has a companion provision called Section 206CCA that applies the same principles to TCS (Tax Collected at Source).
Section 206CCA imposes higher TCS rates on specified persons who have not filed their income tax returns. The TCS is collected at the higher of twice the applicable rate or 5%.
Just like with TDS, the collector needs to verify if the buyer is a specified person. The same online compliance check facility can be used for this verification.
The higher TCS rates apply to transactions like sale of goods, provision of services, and other activities that normally attract TCS under the Income Tax Act.
Who is the specified person U/S Section 206AB?
A "specified person" under Section 206AB refers to a taxpayer who meets specific non-compliance criteria. Understanding this definition is crucial for both deductors and taxpayers.
A person is considered a "specified person" if they have not filed income tax returns for the past two assessment years immediately preceding the year in which tax is to be deducted. Additionally, the time limit for filing the return under section 139(1) must have expired for both years.
The person must also have been subject to TDS and TCS of Rs. 50,000 or more in each of these two previous years to be classified as a specified person.
It is important to note that non-resident taxpayers who do not have a permanent establishment in India are not considered specified persons under this section. The status of being a specified person is determined at the beginning of each financial year based on the compliance status of the previous years.
What are the exclusions under Section 206AB?
Section 206AB does not apply universally to all payments. Several important exclusions exist where normal TDS rates continue to apply regardless of the recipient's compliance status.
The key exclusions under Section 206AB include payments that attract TDS under:
- Section 192 (Salary payments)
- Section 192A (Payments from Employees Provident Fund)
- Section 194B (Winnings from lottery, crossword puzzles)
- Section 194BB (Winnings from horse races)
- Section 194LBC (Income from investment in securitisation trust)
- Section 194N (Cash withdrawals exceeding specified limits)
These exclusions ensure that certain essential or specific payments remain unaffected by the higher TDS rates, even if the recipient is a non-filer.
Wondering how to manage your finances better while staying tax-compliant? Check your eligibility for a Bajaj Housing Finance Home Loan today. You might already qualify for competitive interest rates - find out by entering your mobile number and OTP.
How to apply for Bajaj Finserv Home Loan
Applying for a Bajaj Housing Finance Home Loan is a straightforward process designed for convenience and speed. Here's how you can apply:
- Visit the home loan page and click on ‘APPLY’.
- Enter your full name, mobile phone number, and employment type and your preferred loan type.
- Verify your phone number with an OTP and then enter additional details like your monthly income, required loan amount, and if you have identified the property.
- Enter your date of birth, PAN number and other details as requested depending on your selected occupation type.
- Click on ‘SUBMIT’. Now, a Bajaj Finserv representative will connect with you and guide you through the next steps.
Eligibility criteria to get home loan from Bajaj Finserv
Understanding the eligibility criteria for a Bajaj Housing Finance Home Loan helps you prepare better for your application. Here are the key requirements:
- Indian national
- Between 23 years to 67 years (salaried) or 23 years to 70 years (self-employed)
- CIBIL Score of 725 or higher
- Salaried employee, a professional individual, and a self-employed individual.
- Documents required for home loan:
- KYC documents (identity and address proof)
- Proof of income (salary slips or P&L statement)
- Proof of business (for self-employed applicants), and
- Account statements for the last 6 months
- Home loan interest rates from Bajaj Finserv are competitive, starting from as low as 8.25%* p.a, with flexible repayment tenures extending up to 32 years.
Managing tax compliance while planning major financial commitments like buying a home requires careful consideration. Section 206AB serves as a reminder of the importance of staying compliant with tax filing obligations to avoid higher TDS rates.
Bajaj Housing Finance Home Loan offers a comprehensive solution for your home financing needs with several standout features:
- Competitive home loan interest rates starting from 8.25%* p.a
- High loan amounts up to Rs. 15 crore* for eligible applicants
- Flexible repayment tenures extending up to 32 years
- Minimal documentation and quick processing
- Top-up loan facility available on existing home loans
- Special offers for women homeowners with reduced interest rates
- No hidden charges or pre-payment penalties
- Dedicated relationship manager for personalised assistance
- Online account management for convenient EMI payments
Whether you're a first-time homebuyer or looking to upgrade your existing property, checking your eligibility for a Bajaj Housing Finance Home Loan is the first step toward making your dream home a reality. Enter your mobile number and complete the OTP verification to explore loan options tailored to your needs.
*Terms and conditions apply
Check also:
| Income Tax Login | Income Tax E Filing |
| Income Tax Slab | Tax Concept |
| Calculate Tax | New Tax Regime Income Tax Slabs |
| New Tax Regime Calculator | New Tax Slab |
| Short Term Capital Gain Tax | Long Term Capital Gain Tax |
