For those not filing tax returns, Budget 2021 has set down strict requirements. So, if you haven’t been slinging your ITR, you have to compensate for a higher TDS. For those who do not file their income-tax returns, also the tax collected at source (TCS) will rise. The penalty TDS and TCS thresholds are 10-20 percent from July 1, 2021, as opposed to 5-10 percent usually. The newly established income-tax act sections 206AB and 206CCA address the widened reach of TDS and TCS.
Higher taxation this year
Until now, if you did not make clear your PAN number, a higher TDS rate was only acceptable. The Government noted that the number of PAN cards provided increased as a result of the earlier decision to raise TDS rates for non-PAN owners. But it did not contribute to more individuals filing their ITR. Yet an uncertainty is there. If the recipient had filed his income-tax returns, the entity who needs to subtract the TDS does not know. For example, the tenant subtracts TCS while paying the rent to the landlord.
He or she is also required to subtract a higher TCS, as per Budget 2021, if the tenant has not submitted his regular ITR. It continues to be observed if one is requested to voluntarily submit a copy of the income tax return, much as today several are required to supply PAN card copies for many budgetary and even non-financial activities. That being said, the Finance Bill, 2021-22, specifies that the tax withheld on early withdrawals from the provident fund, lottery and horse race winnings, cash withdrawals above Rs 1 crore and investments in securitization trust will be excluded from the higher taxation level. Remember that the rates of taxation on them are still high. For all the other sectors, for those who do not submit income tax returns, the TDS/TCS may be double the specified rate or 5 percent, whichever is higher.
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