Higher TDS deduction from July 1st 2021 if you have not filed ITR

income-tax

If you have not filed your income tax return (ITR) then you have to pay a higher amount of TDS July 1, 2021.

A person who has not filed ITR for the previous two financial years and the aggregate TDS  deducted from payments   in each of these financial years exceeds Rs 50,000, then such person would be subjected to higher TDS.  

Suppose you have not filed income tax returns for FY 2018-19 and 2019-20. And you have, interest from   deposits etc. where total TDS exceeded Rs 50,000 in each FY.  In this case, you will be subjected to a higher TDS.  

The main objective of this  is to ensure that income tax return filing compliance is done  by all taxpayers. It will ensure correct income is reported to Income Tax Department. ITR filing will become mandatory to avoid higher TDS, in future years

Higher TDS will be deducted under following conditions:

  1.  Individual has not filed income tax return in the previous two financial years for which due date has expired.
  2.  Sum of TDS each of the financial years is Rs 50,000 or more.

The TDS rate that will be applicable to such individuals will be higher of the following:

  1. Twice the rate specified in the relevant section;
  2. Twice the rate or rate in force; or
  3. 5%

Let us understand with example

On Bank FDR normal  rate of TDS is 10%  

Now as per new rule if conditions are satisfied, then new TDS rate will be higher of the following:

a) Twice the rate specified in the relevant section, i.e., 20% (10% X)
b) Twice the rate or rate in force 20% (10 X 2); or
c) 5%

The highest rate is 20%.   Thus, this will be applicable to interest income from fixed deposit if ITR is not filed for both previous two financial years and TDS in each financial year exceeds Rs 50,000.

Further, a list is prepared by the tax department for financial year

  1.  2018-19
  2. 2019-20
  3. 2021-22

The list contains the name of taxpayers who have not filed ITR for both the years and has aggregate TDS   of Rs 50,000. 

IPA offers Income Tax Course in Delhi