In order to discourage and monitor money transactions, the federal government amended Section 194N of the Income-tax Act with impact from July 1, 2020. According to the revised provision, a financial institution is required to deduct TDS at 2% when money withdrawal by an individual from a number of accounts maintained by him with such a financial institution exceeds Rs 1 crore within the earlier 12 months.
However, if such an individual has not filed their earnings tax return for the three earlier evaluation years and the time restrict for submitting return beneath Section 139(1) has expired, then TDS is required to be deducted at 2% on money withdrawals exceeding Rs 20 lakh as much as Rs 1 crore and at 5% on money withdrawals in extra of Rs 1 crore.
Credit for TDS
Credit for TDS deducted by the financial institution can be accessible to the assessee and such TDS quantity would even be mirrored of their Form 26AS. However, to assert credit score for the taxes deducted beneath Section 194N, assessees should file their earnings tax returns in Forms ITR 2 or 3 solely. The assessee can not declare credit score of TDS beneath Section 194N in Form ITR 1 regardless that his taxable earnings could also be beneath Rs 50 lakh.
It is unclear as to why the federal government has carved out this exception in Rule 12 of the Income-tax Rules, 1962 for claiming credit score for taxes deducted Section 194N. An assessee having wage earnings beneath Rs 50 lakh, who would in any other case file his return of earnings in Form ITR1, is now required to file his return of earnings in ITR2.
What is fascinating to notice is that the particulars that such an assessee would report in ITR 1 are the identical that they may now report in ITR 2. Hence, one can not assist however marvel concerning the objective of this exclusion. One of the explanations could also be that the algorithm set by the division is such that return submitted in Form ITR2/3 could also be topic to further verification throughout processing and allows the division to establish circumstances for additional scrutiny.
While submitting the ITR, the assessee should make sure that the proper ITR kind is being submitted. While ITR 1 is the best amongst all ITR varieties and the assessee could have been submitting his earnings tax return within the mentioned kind, exceptions should be made within the years TDS beneath Section 194N is deducted.
The author is companion, Nangia Andersen India. Inputs from Neetu Brahma.
Source: www.financialexpress.com”