Facing higher TDS due to non-filing of ITR? Here's how to get out of the list

Effective from July 1, 2021, those who have not filed income tax returns (ITR) for FY 2018-19 and FY 2019-20 and their aggregate TDS and TCS in each of these financial years exceeds Rs 50,000, will face higher TDS/TCS on most non-salary incomes.

The income tax department has created a list of persons (called specified persons) for whom this higher rate of TDS, TCS will be applicable. Tax deductors such as banks, mutual funds, companies etc. can check if higher tax is to be deducted from interest/dividend paid to an individual. This list can be viewed here: https://report.insight.gov.in. by the deductors.

Now, can a person on whom higher TDS is applicable remove his/her name from the list of specified persons? Yes, such an individual can remove his/her name from the list and avoid higher TDS/TCS in the rest of the months of the financial year. This can be done by filing ITR for FY 2020-21.


The income tax department has issued a circular on June 21, 2021, clarifying that if a person files ITR for FY 2020-21, then his/her name will be removed from the list and higher TDS/TCS will no longer be applicable to him/her. Further, an individual can also remove his/her name by filing ITR for FY 2018-19 or FY 2019-20. However, the deadline of filing ITR for FY 2018-19 and FY 2019-20 has already expired.

As per the circular, "If any specified person files a valid return of income (filed & verified) for assessment year 2021-22, his name would be removed from the list of specified persons. This will be done on the due date of filing of return of income for A. Y. 2021-22 or the date of actual filing of valid return (filed & verified) whichever is later."

Sachin Vasudeva, a practising chartered accountant, says, "Section 206AB provides that a person who has not filed his return of income for two consecutive assessment years preceding the relevant previous year in which tax has to be deducted, would become a specified person provided his aggregate tax deducted at source is more than Rs 50,000 in each of those assessment years. Accordingly, if a person has not filed his/her return for FY 2018-19 and FY 2019-20, such a person would be a specified person. If such person files his return for FY 2020-21, then his/her name would be removed from the list of specified persons for FY 2021-22 as returns for one assessment year prior to FY 2021-22 would have been filed by such person."

The last date for filing ITR for FY 2020-21 is December 31, 2021, extended from the previous deadline of September 30, 2021. Vasudeva says, "The individual will be excluded from the specified list only after the later of the two events, filing and verification of income tax return or expiry of the due date of filing the return. Till such exclusion, the person would be a specified person."

Thus, once you have filed your ITR for FY 2020-21 ensure that it is verified as well. Your name from the specified persons' list would be removed after December 31, 2021, provided you have filed and verified your ITR by that time.

Sudhakar Sethuraman, Partner, Deloitte India says, "The new law emphasises the importance of filing a valid return of income for the financial year 2020-21 which is due by December 31, 2021, for individual taxpayers and February 15, 2022, for individual taxpayers whose accounts are required to be audited. In addition, it is imperative that the ITR-V is electronically verified or sent to the Centralized Processing Centre, Bengaluru manually for the return of income to be treated as valid. If the ITR is filed but not verified, then the individual's name would not be removed from specified person list. The deductor will continue to deduct TDS at higher rates."

What if you file belated ITR?
Sethuraman says, "There is no clarity whether a belated return filed and verified after the expiry of the original ITR filing deadline can be treated as a valid return. This is because the first condition to not be treated as a specified person requires taxpayers to file the ITR as per the time limits specified under section 139 (1) [Currently December 31, 2021] whereas for the FY 2020-21, it is given that ITR can be filed by the specified persons even after the expiry of original ITR filing deadline."