Individuals who find themselves in a situation where their bank, employer, or any financial institution mistakenly withhold taxes in a different financial year can now take proactive steps to rectify this issue directly with the income tax department. This development offers a more efficient and user-friendly approach to addressing taxation discrepancies. This big group called the Central Board of Direct Taxes (CBDT) has made something called Form 71. It helps you to change the mistakes where taxes were taken away from you at the wrong time in the past.
Form 71 Introduction: The Central Board of Direct Taxes (CBDT) has introduced Form 71 as a crucial tool to rectify inaccurately deducted Tax Deducted at Source (TDS) credits pertaining to previous financial years. The introduction of this form marks a significant milestone in the effort to streamline and enhance the tax correction process. The official announcement regarding Form 71 was made by the CBDT on August 30, 2023.
Example Illustration: To better comprehend the utility of Form 71, consider a common scenario. Let’s say you have invested in a Fixed Deposit (FD), and during the financial year 2022-23 (also known as the Assessment Year 2023-24), your bank erroneously deducted TDS in the financial year 2023-24 (Assessment Year 2024-25). Due to this timing error in tax deduction, you were unable to avail yourself of the TDS credit in the correct assessment year, i.e., 2023-24. The correct tax treatment should have been applied in the financial year 2022-23, allowing you to claim the TDS credit for that fiscal year. Form 71 is the mechanism through which such discrepancies can be rectified, ensuring accurate taxation.
Shares and Dividends: Form 71 also addresses issues related to shares and dividends. In instances where you hold shares in a company, and the dividends are paid out in a different financial year than what you reported in your Income Tax Return (ITR), it can lead to TDS credit mismatches. This form provides a straightforward resolution to such situations, preventing tax complications arising from the timing misalignment of income and tax deductions.
Direct Communication: Effective from October 1, 2023, taxpayers are granted the privilege of engaging directly with the income tax department to resolve TDS-related concerns, eliminating the need to seek recourse through the intermediary tax deductor, such as a bank. This change enhances convenience and expedites the correction process.
Past Income Correction: Form 71 serves as a potent instrument for addressing TDS mismatch issues specifically related to income earned in previous financial years. It effectively corrects situations where taxes were deducted in the year of payment rather than in the correct assessment year, aligning tax liabilities with the appropriate fiscal period.
Deadline for Submission: Importantly, there exists a finite time frame within which Form 71 can be submitted. Taxpayers must ensure that they submit this form within two years from the conclusion of the financial year in which the TDS was erroneously deducted. Beyond this deadline, the form cannot be utilized for the purpose of correction, underscoring the importance of timely action.
Online Submission: The process of submitting Form 71 has been made seamless and accessible through the income tax e-filing portal. This online submission capability enhances the convenience factor, allowing taxpayers to initiate the correction process from the comfort of their homes or workplaces.
Verification: It’s vital to ensure the proper verification of the information provided in Form 71. This verification can be accomplished using either an electronic verification code (EVC) or a digital signature certificate (DSC), depending on the specific method that is applicable to the taxpayer’s situation.
Simplified Process: One of the primary objectives of introducing Form 71 is to simplify and expedite the process of claiming TDS credits. This streamlining ensures that eligible refunds are not held up due to discrepancies between the timing of income declaration and TDS deductions. The form effectively bridges the gap between the two, facilitating fair and accurate tax treatment.
Empowering Taxpayers: With the advent of Form 71, individuals now possess the means to correct TDS credit disparities when they have already reported their income in a prior Income Tax Return (ITR) for that respective year. This empowerment places taxpayers in greater control of their financial affairs and tax obligations.
In conclusion, Form 71 represents a notable advancement in the field of tax administration, enabling individuals to rectify TDS credit discrepancies associated with income from previous financial years. By offering a simplified and direct avenue for correction, this initiative not only enhances taxpayer convenience but also fosters a more equitable taxation system. It is important for individuals to be mindful of the submission deadline and leverage the online submission option for a hassle-free experience when using Form 71 to address TDS-related issues.
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