Budget 2021

Budget: Stricter rules for non-complaint taxpayers

Keerthi Sanagasetti BL Research Bureau | Updated on February 02, 2021

Will suffer a higher rate of tax deduction at source

On one hand where the Finance Minister had proposed the easing of certain compliance requirements for select taxpayers, she had also tightened the noose for the non-complaint taxpayers, on the other. The proposed changes also seek to shorten the deadlines for filing belated or revised returns.

Higher rates for not filing ITR

Taxpayers who did not file their income tax returns in any of the two previous years, will now suffer a higher rate of tax deduction at source (TDS). For such taxpayers, their current year’s incomes would be subject to a TDS rate which is — 5 per cent or twice the rate of TDS normally applicable for the said income, whichever is higher.

Also read: Faceless interaction, painless compliance

For instance, if your rental income in any year exceeded ₹2.4 lakh, the tenant was required to deduct TDS at 10 per cent on the rent. If you haven’t filed your ITR in both the previous years, the rate of TDS on your rental income shall now be 20 per cent, according to the proposed changes.

Shorter deadline for belated/ revised returns

Per the provisions of the IT Act, even after the expiry of the due date, taxpayers were allowed to file belated returns with the payment of interest and penalty. Taxpayers could also revise their return filed in a particular year for any error committed.

The deadline for filing such belated or revised returns was the end of the assessment year or before the completion of the assessment (by IT officer) whichever is earlier. That is for the financial year 2020-21 (assessment year 2021-22), while the last date for filing income tax returns (for individuals), is July 31, 2021, taxpayers could file belated returns up to March 31, 2022.

Also read: Paper work made less taxing

However, the Budget has proposed to advance the deadline by three months. Thus, the belated return or revised return should now be filed three months before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

That is, in the above example the last date for filing belated return is now revised to December 31, 2021.

Reducing uncertainty

Besides tightening the norms in certain cases, the Budget also proposed to reduce the time-limit for re-opening assessments. Earlier, an assessment could be re-opened for up to 6 years and in serious tax fraud cases for up to 10 years. This is by virtue of powers granted under section 149 of the IT Act, which prescribes time-limit within which an assessing officer can issue notice to a taxpayer. As a result, taxpayers remained under uncertainty for a long time.

Hence, the Budget proposed to shorten this time limit. Per the proposed amendments, notice can be issued only within three years from the end of the relevant assessment year. However, in select cases, notice can be issued, within ten years from the end of the relevant assessment year. This is possible only when the Assessment Officer has proof to show that income worth ₹50 lakh or more has been concealed, in such assessment year. This amendment shall only be applicable from assessment year 2021-22 onwards.

Published on February 02, 2021

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