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Section 206AB Omitted from 1 April 2025: Current TDS Position

Section 206AB omitted from 1 April 2025

Section 206AB is no longer applicable for TDS deductions made on or after 1 April 2025. The provision, which required higher TDS for certain income-tax return non-filers, was omitted by the Finance Act, 2025. This page is therefore maintained as a historical reference and a current compliance explainer for deductors.

Current position in 2026

  • Section 206AB has been omitted with effect from 1 April 2025.
  • Deductors should not apply higher TDS merely because the deductee did not file an income-tax return.
  • Other higher-rate provisions, including PAN-related rules where applicable, must still be checked separately.
  • Old ERP or TDS-master logic that automatically applies Section 206AB should be reviewed and disabled for current deductions.

What Section 206AB used to do

Before its omission, Section 206AB imposed a higher TDS rate on a specified person who had not filed the relevant return of income and satisfied the statutory conditions. The higher rate was generally determined by comparing multiples of the normal TDS rate with the prescribed minimum rate.

The provision created an additional verification burden for deductors because they had to identify whether a payee qualified as a specified non-filer before processing TDS.

What changed from 1 April 2025?

The Finance Act, 2025 omitted Section 206AB. Therefore, for deductions made on or after 1 April 2025, a deductor should not use Section 206AB as a reason to increase the TDS rate.

This change simplified TDS compliance by removing the need to test return-filing status solely for Section 206AB. However, omission of Section 206AB does not mean that every payment automatically attracts the normal rate. The deductor must still verify the applicable charging section, threshold, PAN status, lower or nil deduction certificate, treaty position where relevant, and any other special rule.

Practical checklist for finance and accounts teams

  1. Identify the correct TDS section for the payment.
  2. Check whether the monetary threshold for that section is crossed.
  3. Verify PAN and any lower or nil deduction certificate.
  4. Do not apply Section 206AB for current deductions merely because the payee is a non-filer.
  5. Review ERP, payroll, vendor-master and TDS utility configurations that may still contain legacy 206AB logic.
  6. Document the rate applied and the reason for applying it.

Example

Assume a company makes a payment in August 2026 that is otherwise subject to TDS under the relevant provision. The vendor has not filed an earlier income-tax return. The company should not increase TDS solely because of that non-filing status under Section 206AB, because Section 206AB has already been omitted. The company should instead apply the rate required under the current TDS provision after checking PAN and other applicable conditions.

Does Section 206AA still matter?

Yes. Section 206AB and PAN-related higher-rate provisions are different concepts. The removal of Section 206AB does not, by itself, remove the need to examine the consequences of not furnishing PAN where the law requires PAN to be furnished.

Why keep this old URL live?

Many taxpayers, accountants and ERP users still search for Section 206AB because old articles, software settings and internal SOPs continue to mention it. Retaining this URL as an updated historical-reference page helps readers understand both the old provision and the current position without confusing an obsolete rule with live law.

Frequently asked questions

Is Section 206AB applicable in FY 2026-27?

No. Section 206AB was omitted with effect from 1 April 2025 and should not be applied to current deductions.

Should higher TDS be deducted only because a vendor has not filed an ITR?

Not under Section 206AB for deductions made after its omission. Other provisions must still be checked independently.

Should old Section 206AB logic be removed from ERP systems?

Yes. Finance teams should review vendor-master and TDS calculation logic so obsolete Section 206AB conditions do not continue to affect current deductions.

Official references

Last reviewed: 20 August 2026. This article is a general compliance reference. Verify the current provision applicable to the payment before deducting tax.