Introduction
The Finance Act 2023 introduced significant changes in tax compliance, particularly concerning the claim of Tax Deducted at Source (TDS) credits. Effective October 1, 2023, the insertion of Section 155(20) in the Income Tax Act aims to streamline the process for taxpayers facing discrepancies due to timing mismatches between reported income and TDS deductions. This article serves as an exhaustive guide on the intent, purpose, and procedures for filing Form 71 to claim TDS credits.
Understanding the Need for Section 155(20)
In the context of TDS compliance, discrepancies often occur when:
- Taxpayers report income on an accrual basis (accounting for income when earned, not when received).
- The deductor (e.g., employer, client) deducts TDS when making payments but remits it to the government in a subsequent financial year.
This mismatch can create issues, as the taxpayer’s income is reported in one year while the corresponding TDS appears in another, leading to challenges in claiming the tax credit.
Key Features of Section 155(20)
- Objective: To provide a mechanism for taxpayers to claim TDS credits even with timing mismatches.
- Application Timeline: Taxpayers must apply within two years from the end of the financial year in which TDS was deducted.
- Authority: The application for rectification will be reviewed by the Assessing Officer (AO), who holds the discretion to amend the assessment to allow for the TDS credit.
What is Form 71?
Form 71 is the designated application form introduced under Rule 134 of the Income-tax Rules, 1962, specifically for claiming TDS credits under the new provisions of Section 155(20).
Purpose of Form 71
Form 71 facilitates taxpayers in rectifying TDS credit mismatches by providing the necessary information to tax authorities, ensuring they receive their rightful tax credits.
Detailed Procedure for Filing Form 71
Here’s a step-by-step guide on utilizing Form 71 to claim TDS credits effectively:
Step 1: Eligibility Assessment
Before filing Form 71, ensure you meet the following criteria:
- Income Reporting: Confirm that you reported income in an earlier assessment year on an accrual basis.
- Delayed TDS Deduction: Verify that TDS was deducted by the deductor in a subsequent financial year.
- TDS Mismatch: Check for discrepancies in your Form 26AS, where TDS does not reflect in the year the income was reported.
Step 2: Collect Required Information
Gather all necessary information for completing Form 71:
| Required Information | Details |
|---|---|
| Personal Information | Name, PAN, Aadhaar, Address, Email, Mobile Number, Residential Status, Relevant Assessment Year, Date of Income Return Filing. |
| Income Details | Total income declared in the relevant assessment year, amount of specified income, and applicable tax rate. |
| TDS Information | Amount of TDS, date of deduction, relevant section and rate under which TDS was deducted, date of payment to the government, and amount claimed for the relevant assessment year. |
| Deductor’s Information | Name, PAN, and TAN of the deductor. |
Step 3: Login to the E-Filing Portal
- Access the e-filing portal of the Income Tax Department.
- Login using your credentials (PAN, password, and captcha).
Step 4: File Form 71
- After logging in, navigate to the "E-File" menu.
- Select "Forms" and then choose "File Form" from the dropdown.
- Click on "Form 71" from the list of available forms.
Filing Forms for Persons Not Dependent on a Source of Income
For individuals who do not have income or are not dependent on a specific source of income (such as pensioners or retired professionals), follow these additional steps:
- Select the Relevant Category: Choose the appropriate category in Form 71 that aligns with your income status.
- Declare Income Sources: Provide a detailed account of any income sources, even if minimal, to ensure transparency in your application.
Step 5: Complete Form 71
Form 71 consists of two main parts:
Part 1: Basic Details
- Personal Information: Fill in your basic details as gathered earlier (Name, PAN, Aadhaar, Address, etc.).
- Relevant Assessment Year: Mention the assessment year for which the TDS credit is claimed.
- Date of Filing Income Return: Provide the date you filed your income tax return.
Part 2: TDS Deductor Details
- Details of TDS Deductor: Include the name, PAN, and TAN of the deductor.
- TDS Deduction Amount: Indicate the amount of TDS deducted.
- Date of Deduction: Specify the date when the TDS was deducted.
- Relevant Section and Rate: Mention the section under which TDS was deducted and the applicable rate.
- Date of Payment to Government: Fill in the date when the deducted TDS was paid to the government.
- Amount Claimed for Relevant Assessment Year: Clearly state the amount you are claiming for that assessment year.
Step 6: Supporting Documentation
Attach the following documents to support your application:
| Type of Document | Details |
|---|---|
| TDS Certificates | Certificates issued by the deductor confirming the TDS deduction. |
| Challans | Payment receipts showing the remittance of TDS to the government. |
| Other Relevant Proof | Any additional documents that validate the TDS claim, such as correspondence with the deductor. |
Step 7: Review and Submit
- After filling out the form and attaching the necessary documents, review all information for accuracy.
- Submit the form electronically, ensuring you use either a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC).
Step 8: Follow-Up and Compliance
- After submitting Form 71, monitor your application status through the e-filing portal.
- Respond promptly to any inquiries or requests for additional information from the Assessing Officer (AO).
- Be prepared to provide further documentation if necessary.
Illustrative Example: Filing Form 71
Scenario:
Taxpayer: Ashu
- Income: Ashu earns ₹6,00,000 from consultancy services in FY 2022-23 and reports this income in AY 2023-24.
- TDS Deduction: The client deducts ₹60,000 as TDS but only remits it to the government in April 2024.
- TDS Reflection: This TDS appears in Ashu's Form 26AS only for AY 2024-25.
Claiming TDS Using Form 71
Eligibility Assessment: Ashu confirms that he reported the income in AY 2023-24, but the TDS is reflected for AY 2024-25.
Information Gathering:
- Personal Information: Ashu’s PAN, Aadhaar, and other details.
- Income Details: Total income reported ₹6,00,000.
- TDS Details: TDS deducted ₹60,000, deduction date: March 2024.
- Deductor Details: Client’s PAN and TAN.
Filing Form 71:
- Ashu logs into the e-filing portal and fills out Form 71 with the collected information.
- He submits the form using EVC.
Supporting Documents:
- Ashu attaches the TDS certificate and the challan showing TDS payment.
Follow-Up:
- Ashu checks his application status and responds to any queries from the AO, ensuring smooth processing of his application.
Conclusion
Form 71, under the provisions of Section 155(20), represents a significant advancement in the tax compliance landscape, empowering taxpayers to claim rightful TDS credits. By following the outlined procedure and ensuring all required documentation is in order, taxpayers can navigate the complexities of TDS mismatches effectively.
