Those individuals who have not filed their income tax returns (ITR) for FY 2020-21 will have to shell out more TDS/ TCS from April 1. This is applicable to those individuals who have not filed their returns and have a total TDS/TCS deducted of Rs 50,000 or more.

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"Not filing ITR can result in higher TDS next year. The last date to file ITR for AY 2021-22 is March 31, 2022,” the income tax department had tweeted on March 25. The post said if an individual failed to file ITR for AY 2021-22, the applicable TDS rate may increase. Assessment year (AY) 2021-22 means financial year 2020-21.

Not filing ITR can result in higher TDS next year.

The last date to file ITR for AY 2021-22 is 31st March, 2022.

Let’s not wait for the last day! #FileNow

Pl visit: https://t.co/GYvO3n9wMf#ITR pic.twitter.com/cfXpKPEgp8

— Income Tax India (@IncomeTaxIndia) March 25, 2022

New ITR provision

The government had inserted a new provision in Budget 2021, which provided for imposing a higher tax deduction at source (TDS) or tax collected at source (TCS) rate on non-filers on specified sources of income such as interest income from recurring deposits, fixed deposits, dividend income and annuity payments. As per the provision, if an individual did not file ITR for FY 2018-19 and FY 2019-20 and if the TDS/TCS deducted in each year was higher than Rs 50,000, then in FY 2021-22 higher tax would be deducted from the taxpayer's interest income, dividend income, annuity payments, etc.

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.

TDS rate

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.

Pay now

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.