What to do if a higher TDS Rate is applicable due to Non-Filing of ITR

The IT Department has created a list of those persons for whom a higher rate of TDS & TCS will be applicable and called a specified person list.

You May Also Refer: How to use ITR Compliance Check Tool for Section 206AB & 206CCA

With the effect from July 1st, 2021 those who have not filed ITR yet for FY 2018-19 & 2019-20 and their respective TDS & TCS of each FY exceeds Rs. 50000, will face higher TDS & TCS on non-salary income.

Now, the question arises can a person whose name is mention in the list of specified persons on whom higher TDS is applicable, remove his/her name from the list?

Yes, such a person can remove himself/herself from that specified list and avoid higher TDS/TCS in the rest of months of FY. They can do this by filing ITR for FY 2020-21.

As per the circular issued by IT Department on June 21st, 2021, ” If any specified person files a valid ITR (filed & verified) for AY 2021-22, his/her name would be removed from the list of a specified person.”

It will be done on the date of filing of actual valid return (filed and verified) or due date of filing ITR for AY 2021-22, whichever is later.

The Circular also states that filing the ITR for FY 2020-21, names of the persons removed from the list and higher TDS/TCS will no longer be applicable on them. Further, also an individual can remove his/her name by filing Income Tax Return for FY 2018-19 or FY 2019-20. Though, the due date of filing ITR for FY 2018-19 & FY 2019-20 has already expired.

Section 206AB of IT Act provides that who has not filed his/her ITR for two consecutive assessment years preceding relevant previous year in which tax has to be deducted, provided that his aggregate TDS is more than Rs. 50000 in each of those AY, would automatically fall into the specified person category.

Also, “the individual will be excluded from the specified list only after later of these two events i.e, filing & verification of ITR or expiry of the due date of filing the return (the last date of filing ITR is September 30, 2021). Till that, the person would be a specified person.”

Once ITR for FY 2020-21 has been filed, ensure that it is also verified as well. Hence, you have filed and verified your ITR, your name would be removed from the specified person list after Sep 30, 2021, provided that your ITR was filed by that time.