BackITR filing: TDS rules you should know while choosing income tax return form
Income tax return: If a taxpayer has withdrawn cash from one's bank or post office account to the tune of ₹1 crore or more, then in that case, bank will deduct TDS under Section 194N of the income tax act, 1961
PremiumITR filing: Out of various income tax return (ITR) forms issued by the income tax department, most simple form is ITR-1. Many times, ITR-1 is filed by taxpayers as standard ITR form without understanding exact eligibility to file correct ITR form. This is because of the various misunderstandings in regard to some income tax rules. Tax Deduction at Source (TDS) is one such rule that an earning individual must know while choosing its ITR form.
According to tax and investment experts, TDS rules applied on ITR form for an earning individual during ITR filing is explained in Section 194N of the income tax act, 1961. They said that if a taxpayer withdraws cash to the tune of ₹1 crore or above, then in that case the earning individual can't file ITR using ITR-1 form. However, in case the earning individual hasn't filed ITR in last three financial years, then in that case the limit would be ₹20 lakh instead of ₹1 crore. Experts said that in such condition, the taxpayer will have to file its ITR using ITR-2 form.
On how TDS rule plays while choosing the correct ITR form, Mumbai-based tax and investment expert Balwant Jain said, "Under Section 194N of the income tax act, 1961, a taxpayer won't be able to file its income tax return using ITR-1 form if it has done cash withdrawal to the tune of ₹1 crore or more. However, in case, the earning individual has not filed ITR in last three financial years, then in that case the applicable TDS limit would be ₹20 lakh instead of ₹1 crore."
Echoing with Balwant Jain's views, SEBI registered tax and investment expert Jitendra Solanki said, "To know whether one has crossed the upper limit prescribed under Section 194N, one need not to move from pillar to post, but to check under which section the bank or post office has deducted one's TDS. If the taxpayer has crossed cash withdrawal limit under Section 194N, then in that case bank would deduct TDS under this section."
Asked about which ITR form a taxpayer can use if there is TDS deduction under Section 194N, Balwant Jain said, "If there is TDS deduction under Section 194N, then in that case the taxpayer will have to use ITR-2 form instead of ITR-1."
The due date for ITR filing for FY 2021-22 and AY 2022-23 is 31st July 2022.
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