Sections 206AB and 206CCA — Higher TDS for Non-Filers

The compliance trap that catches deductors by surprise

If your payee hasn't filed ITR for two years, you must deduct TDS at double the normal rate. The responsibility is entirely on the deductor — not the payee.

Section 206AB was introduced in the Finance Act 2021 and immediately became one of the most compliance-intensive provisions for deductors. The deductor bears the burden — not the defaulting payee.

Who Is a "Specified Person"

A "specified person" under Section 206AB is someone who:

• →Has not filed ITR for both of the two preceding financial years
• →AND whose TDS/TCS in each of those years exceeded ₹50,000

Both conditions must be satisfied simultaneously. A person who filed late but filed is not a specified person.

The Rate

TDS is deducted at the higher of:

• →Twice the normal rate applicable to the payment
• →Twice the rate in force
• →5%

So if normal TDS is 10% (Section 194J), the rate for a specified person is 20%.

If normal TDS is 2% (Section 194C), the rate is 5% (because 2×2=4%, but minimum is 5%).

Section 206CCA

Section 206CCA is the TCS equivalent — same logic, same rates, applicable on tax collection at source instead of deduction.

How to Check — Compliance Check Utility

The Income Tax portal provides a Compliance Check Utility specifically for 206AB/206CCA:

1. 1Log in to incometax.gov.in
2. 2Go to Tools → Compliance Check for Section 206AB/206CCA
3. 3Upload a CSV of PANs
4. 4Download the result — each PAN flagged as "specified" or "not specified"

Check before every payment, not just once a year. A person can become "specified" mid-year if their prior year's return was due and not filed.

Common Situations

Vendor payments: A contractor who regularly invoices you may not have been filing ITR. If their threshold is crossed, you should have been deducting at higher rates — and if you didn't, the shortfall is your liability.

Professional fees: Many independent professionals — particularly smaller practices — have ITR compliance gaps. Section 194J payments to them are high-risk.

Rent: Landlords over ₹50,000/month are subject to Section 194I. If the landlord is a specified person, the rate doubles.

Deductor's Liability

If you fail to deduct at the higher rate:

• →The shortfall is treated as your default
• →Interest at 1% per month applies
• →Penalty under Section 271C can be levied equal to the amount not deducted
• →Prosecution under Section 276B for wilful default

The TDS demand lands on you, not your payee.

Practical Protocol

Every finance team should have a quarterly process:

1. 1Download list of all vendors, contractors, and professionals paid in the quarter
2. 2Run PANs through the Compliance Check Utility
3. 3Flag any newly specified persons
4. 4Update TDS rates for future payments
5. 5Document the check in the working papers

The complete Section 206AB/206CCA episode — with utility walkthrough, demand scenarios, and the CBDT FAQ analysis — is Episode 11 of TDS Mastery on MentorClub.

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