Section 206AB.
Higher TDS on non-filers (Section 206AB).
Any TDS where the recipient hasn't filed return for the preceding year
When it applies
Section 206AB applies a punitive higher TDS rate when a payee falls in the 'specified person' category — someone who hasn't filed their income-tax return for the preceding financial year despite having ₹50,000+ TDS/TCS that year. It was introduced to push compliance.
Who must deduct
Every TDS deductor under Sections 192-194, except for specific carve-outs (Section 192 salary, Section 192A PF withdrawal, Section 194B lottery winnings, Section 194LBC trust income, and Section 194N cash withdrawal).
Common mistakes
- Not checking the IT portal's Compliance Check tool before each payment.
- Applying 5% blindly — it's the higher of three rates, not always 5%.
- Missing the interaction with 206AA — if both apply (no PAN + non-filer), the higher of 206AA and 206AB applies.
- Treating one-time check as permanent — non-filer status can change once the recipient files.
Frequently asked
How do I check if my payee is a 'specified person' under 206AB?
Use the Compliance Check for Section 206AB & 206CCA on the Income Tax Reporting Portal. Bulk PAN upload returns the status of each. Some payroll/AP systems integrate this check automatically.
Does 206AB apply if the payee has filed for the preceding year but not the year before that?
No. Earlier the rule looked at two preceding years; from FY 2022-23, it's only the immediately preceding year. If the payee has filed for the immediately preceding year, 206AB does not apply.
What if I miss the higher deduction and the payee turns out to be a specified person?
You're liable for the difference plus interest, plus the Section 40(a)(ia) disallowance on the under-deducted portion. Best practice is to add the Compliance Check API call to your vendor master and re-check quarterly.