Come April 1, those who did not file ITR for FY 2020-21 will pay higher TDS

In the following budget, the government amended the provision and made it more stringent. From FY 2022-23, if an individual submits the ITR for FY 2019-20, but not for FY 2020-21 and if the total TDS in FY 2020-21 is more than Rs 50,000, then higher TDS/TCS will be deducted from the individual’s income from April 1, 2022.

According to the provision in the Income Tax Act, 1961, the rate for higher TDS/TCS will be either twice the rate specified in the relevant provision or twice the rate in force or 5 percent.

The higher TDS/TCS provision will not be applicable on the tax deducted at source rates on salary, provident fund and cash withdrawals from the bank account.

The higher rates will continue to apply to the individual till their name is removed from the list. According to a circular released by the Central Board of Direct Taxes (CBDT) in June 2021, the individual’s name is removed from the list once he/she files the ITR. If an individual fails to file the ITR for FY 2020-21 but submits it for FY 2021-22 by the deadline July 31, his/her name will be removed from the list of persons on whom higher TDS, TCS is applicable. However, the department will remove the name of the individual only after verifying the ITR or after the expiry of the due date of filing ITR, whichever is later. It is, therefore, advisable to file ITR for FY 2020-21 and avoid higher TDS/ TCS from April 1.