Relief for these non-ITR filers from higher TDS in budget 2023

There may be some individuals who are not obligated to file their income tax return (ITR). However, these individuals cannot be classified as non-filers. As a result, Union Budget 2023 has proposed changing the definition of "specified person" in sections 206AB and 206CCA of the Income tax Act, 1961, to exclude a person who is not required to submit a return of income for the assessment year relevant to the said previous year.

Note that this amendment will take effect from April 1, 2023.
According to the Union Budget 2023 memorandum, “These sections define 'specified person' to mean a person who has not furnished the return of income for the assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be deducted or collected (as the case may be)-
"· for which the time limit for furnishing the return of income under sub-section (1) of section 139 has expired; and

"· the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in the said previous year."

The provison to these definitions exclude a non-resident from the definition of specified person if the non-resident does not have a permanent establishment in India.

Earlier, if you haven't submitted your income tax return for a relevant year, you will be included on the list of non-filers and subject to a larger tax deduction at source.

According to the circular, if the ITR was not filed for the relevant previous financial year and the aggregate TDS and tax collected at source exceeded Rs 50,000 that year, it would attract a high TDS. Banks will be required to check if an individual has met both conditions to attract a higher TDS.

Relief from special provision for higher rate of TDS/TCS for non-filers of income-tax returns under Section 206AB provides for special provision for higher TDS for non-filers of income-tax returns. Similarly, Section 206CCA of the act provides for special provision for higher TCS for non-filers of income tax returns.

The memorandum of the budget said: "These sections define “specified person” to mean a person who has not furnished the return of income for the assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be deducted or collected (as the case may be)-
"(i) for which the time limit for furnishing the return of income under sub-section (1) of section 139 has expired; and
"(ii) the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in the said previous year.
"The provisos to these definitions exclude a non-resident from the definition of specified person if the non-resident does not have a permanent establishment in India.
"There may be certain persons who are not required to furnish the return of income. It is not the intention to include such persons in the category of non-filers. Hence, in order to provide relief in such cases, it is proposed to amend the definition of the 'specified person' in sections 206AB and 206CCA so as to exclude a person who is not required to furnish the return of income for the assessment year relevant to the said previous year and who is notified by the Central Government in the Official Gazette in this behalf."