The income tax department has created a list of persons (called specified persons) for whom this higher rate of TDS, TCS will be applicable.
The income tax department has created a list of persons (called specified persons) who have not filed income tax returns (ITR) for 2018-19 and 2019-20 but their aggregate TDS and TCS in each of these financial years exceeds Rs 50,000. These people will face higher TDS/TCS on most non-salary incomes.
Tax deductors such as banks, mutual funds, companies etc. can check if higher tax is to be deducted from interest/dividend paid to an individual. This list can be viewed at https://report.insight.gov.in. by the deductors.
As per the instruction of the Income Tax Department, with effect from July 1, 2021, higher TDS is being deducted by entities such as banks, mutual funds and companies on non-salary income paid to these individuals.
However, an individual can remove his/her name from the list and avoid higher TDS/ TCS in the rest of the months of the financial year by filing income tax return for the financial year 2020-21.
The income tax department issued a circular on June 21, 2021, clarifying that if a person files ITR for 2020-21, then his/ her name will be removed from the list and higher TDS/TCS will no longer be applicable to him/her.
“The new law emphasises the importance of filing a valid return of income for 2020-21. It is imperative that the ITR-V is electronically verified or sent to the Centralized Processing Centre, Bengaluru manually for the return of income to be treated as valid. If the ITR is led but not verified, then the individual’s name would not be removed from specified person list,” ET Wealth quoted as saying Sudhakar Sethuraman, Partner, Deloitte India.
The last date to file ITR for 2020-21 is September 30, 2021. It is crucial to correctly evaluate your income tax liability based on the source of income you have. Once you’ve calculated your total taxable income after taking into account all sources of income and claiming any necessary deductions under Chapter VI-A of the Act, you’ll need to apply the appropriate tax rates to calculate your total tax burden.
Before submitting an ITR, any taxes owed on the tax return after claiming credit for prepaid taxes should be paid, including any applicable interest. Even if the tax return filing date has been extended to 30 June 2021, if such self-assessment tax exceeds Rs 1 lakh, it should have been paid before July 31, 2021 to avoid additional interest liability.
