There is bad news for those who missed filing last year’s income tax return ( ITR ) . If you have missed filing ITR for financial year 2020-21 ( assessment year 2021-22 ) , then higher TDS will be applicable on certain incomes you will earn during the current financial year 2022-23 . The Union Budget has amended the provisions under sections 206AB and 206CCA which levy higher TDS on specified persons . The amended rules are effective from April 1 , 2022 .
The last date of filing original ITR for FY 2020-21 was December 31 , 2021. Thus , if you have not filed ITR by this date , then higher TDS will be applicable in FY 2022-23 . Sanjay Kumar , Partner , Deloitte India says , ” The CBDT circular has been issued to determine the non – filers who are subject to higher tax withholding or collection .
This circular is going to help the taxpayers in determining the non – filers and remove difficult in interpretation of the compliance provisions . Such circulars are benefic to the taxpayers who file their tax returns in time , dutifully . “
As per the amended provisions , higher TDS will be levied on individuals , if they satisfy the following conditions :
a ) ITR not filed for the relevant previous financial year immediately preceding the financial year in which tax has to be deducted / collected and , b ) Aggregate TDS and TCS exceeds Rs 50,000 in that previous year .
To ascertain whether higher TDS is applicable or not in the current financial year ( FY 2022-23 ) , banks will be required to check if that individual has filed ITR or not for relevant previous financial year i.e. , FY 2020-21 , according to a Central Board of Direct Taxes ( CBDT ) circular issued on May 17 , 2022. Secondly , banks will be required to check if total TDS and TCS in the previous financial year ( FY 2020-21 ) exceeds Rs 50,000 . Higher TDS will be applicable when both the conditions are met .
Incomes on which higher TDS is not applicable
Do note that higher TDS is not applicable on all incomes that are received by you during FY 2022-23 . Higher TDS is not applicable on following incomes : a ) 192 : Salaries b ) 192A : Withdrawal from PF account c ) 194B : Income by the way of winnings from lottery , Game shows & puzzles etc. d ) 194BB : Income from winnings from horse race e ) 194LBC : Income in respect of investment in securitization trust
f ) 194N : Cash withdrawal in a financial year exceeding a specified financial year g ) 194 – IA : Money received from sale of immovable property h ) 194 – IB : Rent paid exceeds Rs 50,000 per month i ) 194M : Payments of certain sums by Individual & HUFs to resident contractors or professionals . j ) 194S : TDS on transfer of virtual digital asset ( VDA ) such as crypto assets etc. , provided sales , gross receipts or turnover from the business carried on by him or profession exercised by him does not exceed one crore ( in case of business ) or Rs 50 lakh ( in case of profession ) . This section is effective from July 1 , 2022 .
Other incomes such as dividends received from shares and mutual funds , interest received from fixed deposits , recurring deposits , interest received from small savings scheme ( wherever applicable ) etc , higher TDS will be applicable .
Higher tax rate that will be applicable on specified persons
As per income tax laws , higher TDS / TCS will be deducted at the rate , highest of the following on specified persons : a ) Twice the rate specified in the relevant provision of the Act ; or b ) Twice the rate or rates in force ; or c ) The rate of five per cent .
How will banks check if higher TDS has to be deducted ?
As per the CBDT circular , a list of specified persons , on whom higher TDS is applicable in FY 2022-23 , has been prepared taking FY 2020-21 as relevant financial year . The list contains names of taxpayers who did not file ITR in AY 2021-22 and aggregate TDS and TCS in FY 2020-21 exceeds Rs 50,000 .
A bank or any other financial institution can use the Income – tax department’s ‘ Compliance Check for Section 206AB & 206CCA ‘ to ascertain whether higher TDS is applicable or not . Tax deductor will be required to enter single PAN or multiple PANS to know whether concerned individual is specified person on whom higher TDS is applicable .
Do note that during FY 2022-23 , no new names will be added in the above mentioned list . Further , if the specified person files valid ITR ( filed & verified ) for FY 2021-22 ( AY 2022-23 ) , i.e. , this year , then his name would be removed from the list after the expiry of due date of filing ITR or actual date of filing valid ITR , whichever is later .
If the aggregate TDS & TCS does not exceed Rs 50,000 in last financial year i.e. , FY 2021 22 , then his / her name will be removed from the list of specified persons . This would be done on July 31 , 2022 .
Once the tax deductor has checked that an individual is not in a specified list , then they are not required to check again . However , tax deductor will be required to check for those names that are reflected in the specified persons list . This is because these names can be removed from the list .