For many who haven’t filed their earnings tax return (ITR) however their earnings is responsible for TDS deduction, there can be a levy of TDS at the next price. And, in case one doesn’t have the PAN, the speed of tax deduction will even be increased. This new TDS rule can be efficient from July 2021 as per the Funds introduced by the Finance Minister. Archit Gupta, Founder and CEO, ClearTax explains the brand new TDS rule, whom it is going to affect and who all are excluded from it.
On new TDS rule
The Finance Minister in Funds 2021 has launched a particular provision of TDS within the earnings tax act. This part imposed the next TDS price on the people who haven’t filed earnings tax returns, however their earnings is responsible for TDS deduction of greater than Rs. 50,000 within the final two previous earlier years. The speed of TDS shall be increased of the next:
- Twice on the charges specified within the related provisions of the earnings tax act.
- On the price of 5 per cent.
This rule of TDS shall be relevant with impact from 1st July 2021.
On whom will it apply
The brand new provision was created to extend compliance of the earnings tax return submitting by people whose earnings is topic to TDS. It’ll encourage extra people to file ITRs and convey transparency to the federal government. The brand new provision can be particularly relevant to the people talked about under:
The one that has not filed an earnings tax return for 2 monetary years instantly earlier than the monetary 12 months through which tax is required to be deducted, for which the time restrict to file the earnings tax return has expired and
In every of those two earlier years, the full quantity of TDS deducted by the payer is Rs.50,000 or extra.
The brand new provision doesn’t apply to a non-resident who doesn’t have a everlasting institution in India.
On which transactions will it apply
The brand new provision is relevant to the character of funds similar to curiosity, contract, skilled providers, lease, and many others.
Nevertheless, this provision is not going to be relevant for such kinds of transactions the place the total quantity of tax is required to be deducted. Therefore, the checklist of transactions which can be excluded are given under:
- Untimely withdrawal of workers provident fund
- Winnings from any lottery or crossword puzzles or card video games
- Winnings from any horse races
- Revenue from funding in securitisation belief
- TDS on money withdrawals above Rs. 1 crore
What if PAN shouldn’t be furnished
Along with non-filing of the earnings tax returns throughout the due dates, if the desired particular person doesn’t furnish PAN to the payer, then the TDS price shall be increased of the charges talked about above or 20%.
The brand new rule requires the payers to confirm under three issues each time whereas deducting TDS on making funds to the desired individuals:
- Whether or not payee’s final two years tax deduction was above Rs. 50,000
- Whether or not the particular person from whom TDS is deductible has filed his return of earnings for the earlier two years
- And for each the earlier years, the due date to file the unique return has expired.
Whereas making a selected cost, if the due date to file ITR of any of the 12 months has not expired, there is no such thing as a must deduct tax at increased charges on that cost.
Allow us to take an instance, XYZ Co. Ltd. makes a contract cost of Rs. 70 lakhs to Mr. B for the previous two earlier years and on which tax was deducted at 1% (Rs. 70,000 in annually) by XYZ Co Ltd.
Mr. B, nonetheless, has not filed his return of earnings for each the years and the due date to file the ITR has expired.
Therefore, when the payer ascertains these information within the third 12 months, the tax ought to be deducted at supply on the increased charges given above. Accordingly, the TDS price ought to be 5% which is increased than 2% (twice of 1%)
Additional, if the particular person doesn’t furnish PAN to the payer, then TDS shall be deducted on the price of 20%, which is increased than 5% or 2%.