It’s time for non-resident Indians to think again if they still live under the belief that the tax rules back home are not meant for them and do not bother to file their income tax returns on time.
The long arm of the taxman is reaching out even if they are currently stationed outside India earning income back home from various sources; such as property rentals, capital gains from investments and professional fees.
India’s top tax authority, Central Board of Direct Taxes (CBDT), recently announced new rules related to tax deducted at source (TDS) and tax collected at source (TCS) for taxpayers.
CBDT announced that non-filers of income tax returns for the past two financial years, 2018/19 and 2019/20, are subjected to higher TDS and TCS with effect from 1 July 2021, if such tax deduction was INR50,000 ($669, £485, €566) or more in each of those two years.
“TDS rates will be higher than double the rate stated in the pertinent provision of the Income Tax Act, or double the rate or rates in effect, or at a rate of 5%,” according to the new TDS regulation.
Deadline extended
CBDT has extended various deadlines related to income tax to provide relief in the wake of the second wave of covid-19. Taxpayers have time until 15 July to file the TDS for the last quarter of the financial year 2020/21.
“In order to check such non-filers, CBDT has introduced a new utility tool ‘Compliance Check’ for Sections 206AB and 206CCA of the Income-tax Act of 1961, that will ease the compliance burden of the tax deductor. This functionality is already functioning through reporting portal of the income tax department,” CBDT said in a statement dated 22 June.
AS Elavarasan, chairman, Aspa Mangement Consultancy & Chartered Accountants, Dubai, said: “No scope for delinquents to escape for, the tax department has prepared a list of taxpayers who did not file returns of income at the start of the financial year 2021/22 (1 April 2021 to 31 March 2022).
“If the overall TDS deduction in the previous year was less than INR 50,000, or if you have filed your income tax return actively for the past two years, the rules of this section will not pertain to you,” he explained.
Compliance Check devise
The department has devised a new “Compliance Check” feature for Section 206AB & 206CCA to enable tax deductors/collectors to determine if an individual is a “specified person” as defined by the relevant sections.
So far only individuals who didn’t have a PAN (permanent account number, issued by the income tax department) card were liable for a higher TDS rate. The Finance Act of 2021 has effected two changes in rules related to TDS and TCS.
The rules are applicable to residents as well as NRIs.
As a measure of effective tax administration, the income tax department has mandated the tenants of the property of NRIs, banks, fund houses and listed companies – called deductors or collectors — to deduct or collect the tax at source and remit to the income tax department.
The tax thus collected can be claimed back by the taxpayers according their eligibility and tax obligations.
The tax deductor or collector can feed the single PAN (PAN search) of the deductee or collectee on the portal and can get a response from the functionality if such deductee or collectee is a ‘specified person’.
The TDS deductors and TCS collectors would be required to check on the functionality of the PAN of the vendor from whom TDS is to be deducted or TCS to be collected, only at the beginning of the financial year.
A higher rate of TDS will be applicable in the case of NRIs who have any permanent establishment in India. The provisions of the section will also be applicable to TDS deductions on resident payments like service payment to vendors, shareholder dividends and rent.
According to the recent extensions made by the CBDT, taxpayers now have until July 15 to submit their TDS for the fourth quarter of the fiscal year 2020/21. Only at the beginning of the financial year, TDS deductors and TCS collectors are mandated to confirm the functioning of the PAN of the vendor from whom TDS or TCS is to be deducted or collected.
