New penal provisions regarding tax deducted and collected at source (TDS/TCS) are coming into effect in India on 1 July 2021. The provisions were included as part of the Finance Act, 2021 (Act No. 13 of 2021) and generally provide for increased withholding of TDS/TCS for non-filers of income tax returns (specified persons). In such cases, the withholding agent paying income subject to TDS/TCS is required to withhold tax at double the specified rate or 5%, whichever is higher. For this purpose, a specified person means a person who has not filed income tax returns for both of the two previous years and whose aggregate of TDS/TCS is at least INR 50,000 in each of these two previous years. The increased withholding generally applies for resident non-filers, with it specially provided that a specified person does not include a non-resident, unless they have a permanent establishment in India.
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