Urgent information for those individuals who have to pay full income tax for F.Y.2019-20 even before getting income, TDS details

Due to Covid 19 Pandemic, almost all the due dates for filling returns, taxes and required documents to the government has been extended but for the individual whose self assessment tax liability for the Financial Year 2019-20 exceeds Rs. 1 lakh, the last date of submitting income tax liabilities for the same is 31st July, 2020 after that penal interest of 1 per cent per month would be levied on any short payment of this.. The government wants a certain category of tax payers to pay their entire income tax liability for FY 2019-20 even before they get to know their full income and the TDS on it.

Here’s how this anomaly has arisen.

As per the government notification effective June 30,2020, all tax payers with total self assessment tax liability for F.Y. 2019-20 exceeding Rs 1 lakh must pay all of it by July 31, 2020 else penal interest of 1 per cent per month under section 234A of the Income-tax Act would be levied on any short payment of this.

However, the last date for banks and other deductors of tax at source such as employers etc, to file TDS returns and issue TDS certificates for last quarter of FY 2019-20 is July 31 and August 15, 2020, respectively. These two deadlines were advanced from the normal due dates of May 31 and June 15, respectively, due to the Covid 19 pandemic. Individuals whose tax has been deducted at source (e.g. interest paid on cumulative fixed deposits, salary etc.) normally get to know the full amount paid to them (income) and the TDS on it, only when these figures start reflecting in their Form 26AS on the income tax website or when the deductor issues the related TDS certificates to them. However, normally these figures start to show in Form 26AS only after the deductor files it’s TDS return with the income tax department. As the last date by which deductors have to issue TDS certificates for last quarter of F.Y. 2019-20 is August 15, the earliest an individual tax payer can expect to know the income and TDS figures definitively is by July 31 which is the deadline for deductors to file their TDS returns.

The most common types of income on which TDS is deducted, if applicable, include interest on fixed deposits with banks, non-banking finance companies, corporates etc and salary paid by employers. Although it is possible, for an individual to estimate his/her income from these sources, the exact amount paid and the TDS from those payments can only be known once these figures start to show in the Form 26AS of the individual. TDS certificates are normally issued after that.

Although some deductors have filed their TDS returns and are issuing TDS certificates, many others, such as the post office (on Senior citizen saving schemes), may not have done so because as per law they have time till July 31. The deadline to issue TDS certificates is of course even later.

“The result of the above situation is that individuals whose income suffers TDS to a large extent, will face problems in calculating their total income and the tax already deducted on it. Consequently, they will be unable to calculate exact amount of the self assessment tax payable on their total income by July 31. Therefore, paying the correct amount in full by July 31 becomes very difficult. Alternatively, they may end up paying more to avoid penal interest and have to claim a refund,”

However, clearly the government wants that these individuals should pay the full self assessment tax by July 31 even though they may not be able to know their exact income and TDS by then.

Relative Information about the extended dates of filling returns are as follows:

(a) The due date to file income tax returns for A.Y. 2020-21 stands extended from 31 July to 30 November 2020. The due date for tax audit stands extended from 30 September 2020 to 31 October 2020. Similarly, the income tax returns filed upon a tax audit are now due by 30 November 2020.

(b) Reduction in TDS and TCS rates by 25% of the present rates, for payments from 14 May till 31 March 2021.

(d) The last date for completion of assessments which are getting time-barred on 30 September 2020 stands extended to 31 December 2020. In the case of assessments which get time-barred on 31 March 2021, the time stands extended to 30 September 2021.

(e) The last date of making payment under Vivaad se Vishwas Scheme without additional amount stands extended to 31 December 2020.