Be prepared to shell out higher TDS if you have not filed I-T returns

According to the new TDS rule announced in Budget 2021, if an individual has not filed returns for the past two years, then he or she will have to pay double the applicable rate or 5%, whichever is higher.

These new rules will be applicable from July 1, 2021 under sections 206AB and 206 CCA of Income Tax.

Sudhir Kaushik, CEO and founder of Taxspanner.com, said the government is looking to ensure the number of citizens filing I-T returns goes up.

“Through this move, the government wants to increase the scope of income tax filing, especially those who used to pay TDS of 1%, 2%, 5% or 10%. But now they will file returns to avoid double taxation. Apart from this, NRIs and HNIs who earn good interest on FDs are also avoiding huge tax liability by paying only TDS. Returns will be brought under filing,” he told Money9.

However, tax expert Gauri Chadha believes that the move will result in increased compliance burden on the entity deducting TDS.

“The deductor has to check whether the vendor/contractor has filled the returns . This move may immediately affect the working capital of the people. Now, even small contractual vendors will have to make a habit of filing returns,” she said.

It is mandatory for those people whose TDS liability is more than Rs 50,000 to file income tax returns.