What Sections 206AB and 206CCA Meant for Non-Filers

Are Sections 206AB and 206CCA still applicable in India? No. Sections 206AB and 206CCA were omitted with effect from 1 April 2025 by the Finance Act, 2025. For any payment made on or after that date, there is no higher TDS or TCS based on the payee's ITR-filing history. Deduct or collect at the normal prescribed rate for the transaction, subject to the unchanged Section 206AA rule, which still imposes a 20% minimum where the payee has no valid PAN.

If you have been checking a vendor's "specified person" status before every payment, the good news is that you can stop. Sections 206AB and 206CCA, the provisions that made businesses charge higher TDS and TCS on non-filers, were removed from 1 April 2025. They still matter for understanding past deductions and for anyone reconciling older transactions, so this guide explains what they did, how they worked, why they were withdrawn, and exactly what applies in their place today.

The headline: removed from 1 April 2025

The single most important fact in 2026 is that Sections 206AB and 206CCA no longer exist in the statute. The Finance Act, 2025 omitted both sections with effect from 1 April 2025. The Memorandum to the Finance Bill 2025 gives the reason: deductors and collectors found it difficult to verify at the time of payment whether the payee had filed returns, which led to higher rates, blocked capital and a heavier compliance burden.

So the rule is simple for current practice:

• Payments or credits on or after 1 April 2025: No higher rate for non-filers. Use the normal prescribed rate.
• Payments or credits before 1 April 2025: The provisions applied, and any deductions already made under them stand.

What the sections did while in force

Both sections were introduced by the Finance Act, 2021, effective 1 July 2021, with a common policy goal: push chronic non-filers to start filing their income tax returns by making it more expensive to receive payments without filing.

• Section 206AB applied to TDS, the tax a payer deducts from a payment.
• Section 206CCA applied to TCS, the tax a seller collects from a buyer.

They worked by identifying a category called the "specified person" and charging that person a higher rate.

Who was a "specified person"

A payee or collectee was a specified person if, broadly, both of these were true:

1. They had not filed their income tax return for the previous year immediately before the year of the payment, for which the filing due date had expired, and
2. Their aggregate TDS and TCS in that previous year was Rs 50,000 or more.

Certain persons were never specified persons, even if they met the test:

• Non-residents who did not have a permanent establishment in India,
• Persons not required to file an ITR for the relevant year and notified by the government.

The definition was narrowed over time (originally a two-year non-filing test, later simplified to one year), but the Rs 50,000 threshold and the non-filing requirement were the constant core.

What rate applied

Where a person was a specified person, the deductor or collector had to apply the higher of:

• Twice the rate specified in the relevant provision, or
• Twice the rate or rates in force, or
• 5% (for TCS under 206CCA, twice the rate or 5%).

So for a payment otherwise liable to 1% TDS, the specified-person rate was the higher of 2% or 5%, that is, 5%.

Interaction with Section 206AA (no PAN): Section 206AA imposes a minimum 20% where the payee has no PAN. If both 206AA and 206AB applied to the same payee, the deductor had to apply the higher of the two, which in practice usually meant 20%.

Salaried employees and non-residents were excluded

Two exclusions caused the most questions and are worth restating, because they remained true throughout the life of the provisions:

• Salary under Section 192 was excluded. Higher TDS for non-filers never applied to salary. An employer deducted TDS on salary under the normal Section 192 computation regardless of the employee's filing history.
• Non-residents without a permanent establishment were excluded. Payments to such non-residents continued under Section 195 and the applicable treaty rate, not the 206AB higher rate.

How deductors verified status (the Compliance Check tool)

While the provisions were in force, the income tax department ran a Compliance Check for Sections 206AB & 206CCA utility on the reporting portal. Deductors could:

• Enter a single PAN to see whether the payee was a specified person, or
• Bulk upload a CSV of PANs (useful for businesses with many vendors) and download the status for all of them.

This tool is the practical mechanism that has now become unnecessary for payments from 1 April 2025.

What applies now, after the omission

With 206AB and 206CCA gone, the live rules for deciding your TDS/TCS rate are:

1. The rate in the relevant section (for example, 194C, 194J, 194-I), or the rate in a lower deduction certificate under Section 197 if the payee has one.
2. Section 206AA if the payee has not furnished a valid PAN (an inoperative PAN counts as no PAN): the higher of the section rate or 20%.
3. Section 206CC for TCS where the collectee has no valid PAN: the higher of twice the rate or 5%, capped at 20%.
4. From tax year 2026-27, the rates in the TDS and TCS tables of the Income-tax Act, 2025.

For a full view of current rates by payment type, see our TDS rate chart for FY 2026-27 and the guide on which TDS section applies to your payment.

Why this still matters in 2026

Even though the provisions are gone, the topic remains live for three reasons:

• Reconciliation of older periods. Anyone revising TDS returns or responding to notices for periods up to 31 March 2025 must still apply the 206AB/206CCA logic to those transactions.
• Searches and confusion. The sections were heavily publicised, and accounting software, vendor onboarding forms, and internal SOPs still reference them. Teams need to know they can be retired from current processes.
• Penalty exposure on past defaults. A deductor who failed to apply the higher rate during the in-force period remains exposed to being treated as an assessee in default with interest under Section 201(1A) for those past payments, plus the risk of expenditure disallowance.

Don't confuse 206AB with 206AA

These two look similar but are different, and only one survives:

• Section 206AA (still in force): Higher TDS, minimum 20%, when the payee does not furnish a valid PAN. This is about PAN, not about filing returns, and it is unchanged.
• Sections 206AB / 206CCA (omitted from 1 April 2025): Higher TDS/TCS based on the payee's non-filing of returns. These no longer apply.

The practical takeaway: keep collecting and validating PANs (206AA still bites), but stop running the non-filer "specified person" check for current payments.

The story of Sections 206AB and 206CCA is short: introduced in 2021 to nudge non-filers, found to be more compliance burden than it was worth, and removed from 1 April 2025. For any payment you make today, the non-filer check is behind you. Focus on the rules that still bite, the correct section rate, a valid PAN (Section 206AA), and timely deposit and return filing, and your TDS process is both simpler and fully compliant.

This guide is based on Sections 206AB and 206CCA of the Income Tax Act, 1961 (introduced by the Finance Act 2021 and omitted by the Finance Act 2025, effective 1 April 2025), Section 206AA, Section 192, Section 195, and Section 201(1A). It is general information for educational purposes and not a substitute for professional advice. Verify the current law against the latest bare Act and consult a qualified professional for transactions spanning the changeover date.