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ITR Filing: New provision, TDS will be doubled if ITR is not filed

ITR Filing: According to the new provision of the budget, in some circumstances customers or payers may have to pay double TDS (tax deducted at source) compared to normal rates.

ITR Filing: Finance Minister Nirmala Sitharaman presented the budget for the next financial year 2021-22 on 1 February. In this budget, Finance Minister Nirmala Seemaraman has proposed to increase spending under several heads. Apart from this, he has tried to increase the number of taxpayers through the budget and has also added some provisions regarding income tax compliance. He has added one such provision in section 206AB of Income Tax. Under this, now customers or payers may have to pay double TDS (tax deducted at source) as compared to normal rates.




This would be the case if vendors did not file their ITR in the two consecutive years immediately preceding the Relief Financial Year for which the due date for filing the ITR had passed and the vendors would have to file at least every year for two years. TDS or TCS of 50 thousand rupees was to be given. In the provision, the minimum 5 percent rate has been set for TDS rate. A similar provision has been added to section 206 CCA.

Applicable on all non-salary payments except in some cases.

The new provisions of section 206AB / section 206CCA will be applicable to all non-paid payments except in special cases. These new provisions will not apply to lottery winnings, horse racing winnings, income from investment in Securities Trust or TDS on cash withdrawal from bank. The impact of the new provisions brought through the budget is widespread because all contractors, freelancers, professionals, brokers, agents etc., will now need to show proof of filing ITR in earlier years so that they can deduct TDS at normal rates. If no such evidences can be shown, then the customers will have to pay TDS at a rate almost double the normal TDS rate (minimum 5%).

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Compliance Burden will increase

This will increase the compliance burden for all the payers as they will have to raise the necessary avindes from their vendors that they have filed ITR in earlier years. Most vendors do not want to share ITR information with their customers, in such a case, the vendor will either pay extra TDS or the customer will bear the burden. Practically speaking, the burden of new provisions will fall on taxpayers. It is important to note here that if the NRI has any non-salary income from India, then the new provisions will not affect them.




Awaiting industry response

The goal of the government is to compel the vendors themselves to comply with income tax provisions and file ITR. This will increase income tax compliance. However, this will increase the compliance burden for taxpayers, who will have to force a large number of vendors to whom this provision will apply. How the industry responds to this decision of the government, it will have to wait for now.

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