A New Income Tax Form 71, which has been launched by the Central Board of Direct Taxes (CBDT), to rectify an incorrect Tax Deducted at Source (TDS) credit for any fiscal year.
To help you grasp this, consider this example: Let’s say a person has a Rs 1 lakh FD interest in FY 2022–2023 (AY 2023–2024), which means the bank has to withhold TDS. Nonetheless, in FY 2023–24 (AY 2024–25), the bank withheld tax on FD interest. The person will not be eligible to receive credit for this TDS in FY 2023–24 (AY 2024–25) since the bank withheld tax in the incorrect financial year. The TDS credit on this income can only be claimed for FY 2022–2023 and the FD interest was taxable in that fiscal year.
Hence, to correct this problem, from October 1, 2023 an individual can directly solve this problem through the income tax portal instead of visiting the bank branch.
This form can be used to resolve TDS mismatch issues for any income from previous financial years.
TDS credit mismatch issues happen when the method of accounting followed by the recipient of income (taxpayer) and the payer of income (bank etc.) varies. It becomes difficult for the taxpayer to claim TDS credit in the FY in which tax is deducted since income is not declared in ITR in that year.
Why CBDT issued the new Form
CBDT issued a new Form to resolve this issue because many times a taxpayer might get the opportunity to claim credit of the wrongly deducted tax. For taxpayers, it may not be possible to file a revised ITR for the particular FY to claim tax credit as the last date to file a revised ITR has already expired.
The aforesaid amendment shall be beneficial for businesses such as service industry, wherein income is booked on provision of the services on accrual basis, however, tax is deducted by the service receiver, subsequently, at the time of payment against such services.
What is Form 71?
The new Form 71 allows an individual to solve the problem of TDS credit mismatch. It will allow an individual to claim tax credit if income (on which tax has been deducted) has already been declared in ITR by the taxpayer in earlier FY.
Form 71 and its related tax laws/provisions can be taken advantage of by a Taxpayer even in situations wherein revised/belated/updated return is filed by the Taxpayers, however, the corresponding TDS claim not been considered due to the same reflecting in Tax credit statement (Form 26AS) of subsequent financial year,
Time limit to use new Form 71
There is a deadline by which an individual can use Form 71 to correct a wrong TDS credit issue. As per Income-tax Act,1961, an individual can file Form 71 to the income tax department within two years from the end of the financial year in which TDS was deducted. The form can be filled in for any previous financial year in which income was actually subject to TDS.
For example, say the bank was required to deduct TDS on FD interest in FY 2018-19. However, the bank deducted TDS in FY 2021-22. An individual can submit Form 71 to the income tax department by March 31, 2024 (till FY 2023-24) to claim TDS credit. Once this deadline is missed, this form cannot be submitted.
The form must be verified either using an electronic verification code (EVC) or by using a digital signature certificate (DSC), whichever is applicable.
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