Investors, who have not filed income tax returns for the previous three assessment years, will get a TDS-deducted amount if they withdraw more than Rs 20 lakh from the Post Office schemes like PPF, according to media reports.
The TDS will be 2% of the amount exceeding Rs 20 lakh withdrawn from the schemes during a financial year.
If the amount exceeds Rs 1 crore, TDS will be 5% on the amount in excess of Rs 1 crore. This rule will also be applicable on those who file ITR regularly. However, the applicable TDS will be lower at 2% of the amount above Rs 1 crore.
The new rules have been brought in to curb misuse of these schemes by non-filers of ITR, reports say. It’s a known fact that many investors open PPF account in the names of their family members to put large amounts into the scheme. As such family members don't generally have any income of their own, they do not file ITR. This loophole used to allow investors profit from these schemes without having to declare the investment.
The rules will also force more people to file ITR.
These provision under Section 194N of the Income Tax Act 1961 came into effect from 1 July 2020. The government had amended the section through Finance Bill 2020 to include the provision. However, these changes have not been incorporated yet.
CEPT, the technology solution provider to post offices, has started work in this regard. It has identified and extracted the details of such depositors for the period from 1 April 2020 to 31 December 2020. The details will be forwarded to concerned departments for deduction of TDS.
