Claimimg TDS Credit in Previous year while deductor deposited in subsequent year- Use of Form 71- Its benefits and Limitations

Form 71 is an income tax form that can be used to claim credit for TDS deducted in the wrong assessment year. It was introduced by the Central Board of Direct Taxes (CBDT) in August 2023.

However, it is important to be aware of the Purpose, Usage and Limitations of the form and to file it within the prescribed time limit.

Purpose of form 71:

The purpose of Form 71 is to provide a mechanism for taxpayers to claim credit for TDS deducted in the wrong assessment year. This can happen due to a number of reasons, such as:

Usage of form 71:

Form 71 can be used by taxpayers to claim credit for TDS deducted in the wrong assessment year. To do this, the taxpayer must file the form with the Income Tax Department within two years from the end of the assessment year in which the TDS was deducted. The form must be accompanied by documentary evidence to support the claim, such as a copy of the TDS challan or the deductor’s certificate.

What is Benefit of form 71:

The benefit of filing Form 71 is that it allows taxpayers to claim credit for TDS deducted in the wrong assessment year. This can help them to reduce their tax liability and avoid paying interest on the TDS that was deducted in the wrong assessment year.

For using Form 71, you will need to:

1. Download the form from the Income Tax Department’s website.
2. Fill out the form carefully, making sure to provide all of the required information.
3. Sign and date the form.
4. Attach copies of the relevant documents, such as a copy of your Form 26AS, a copy of the TDS challan, or a copy of the deductor’s certificate.
5. Submit the form to the Income Tax Department office in your area.

The Income Tax Department will review your Form 71 and take necessary action. If your request is approved, the TDS will be credited to the correct assessment year.

Here are some of the important things to keep in mind when using Form 71:

1. You can use Form 71 to claim credit for TDS deducted in the wrong assessment year up to two years from the end of the assessment year in which the TDS was deducted.
2. You will need to provide documentary evidence to support your claim.
3. The Income Tax Department may require you to pay a penalty for filing a late Form 71.

Form 71, its usage, benefit and limitations

Form 71 is an income tax form that can be used to claim credit for TDS deducted in the wrong assessment year.

The purpose of Form 71 is to provide a mechanism for taxpayers to claim credit for TDS deducted in the wrong assessment year. This can happen due to a number of reasons, such as:

1. The deductor made a mistake in deducting the TDS.
2. The taxpayer changed their assessment year.
3. The deductor did not file a TDS return.

By filing Form 71, the taxpayer can claim credit for the TDS that was deducted in the wrong assessment year. This will allow them to offset the TDS against their tax liability in the correct assessment year.

The benefits of filing Form 71 include:

1. You can claim credit for TDS deducted in the wrong assessment year.
2. This can help you reduce your tax liability.
3. You can avoid paying interest on the TDS that was deducted in the wrong assessment year.
4. You can avoid penalties for late filing of your income tax return.

The limitations of filing Form 71 include:

You can only claim credit for TDS deducted in the wrong assessment year up to two years from the end of the assessment year in which the TDS was deducted.

You will need to provide documentary evidence to support your claim.

The Income Tax Department may require you to pay a penalty for filing a late Form 71.

There are a few reasons why a penalty may be levied while using Form 71:

Filing Form 71 after the deadline:

The Income Tax Department has prescribed a deadline for filing Form 71. If you file the form after the deadline, you may be liable to pay a penalty. The amount of the penalty will depend on the delay.

Failure to provide documentary evidence:

Form 71 must be accompanied by documentary evidence to support your claim. If you fail to provide the required documentary evidence, you may be liable to pay a penalty.

Fraudulent claim:

If you make a fraudulent claim in Form 71, you may be liable to pay a penalty. A fraudulent claim is a claim that is made with the intent to deceive the Income Tax Department.

Willful neglect:

If you willfully neglect to file Form 71, you may be liable to pay a penalty. Willful neglect is a failure to act that is intentional and reckless.

Quantum of Penalty for Wrong use of Form 71

The amount of the penalty for filing Form 71 after the deadline is 1% of the TDS amount for each month of delay, up to a maximum of 20%. The amount of the penalty for failing to provide documentary evidence is Rs. 100 for each document that is not provided. The amount of the penalty for making a fraudulent claim is up to 3 times the amount of the TDS claim. The amount of the penalty for willful neglect is up to Rs. 20,000.

It is important to note that these are just some of the reasons why a penalty may be levied while using Form 71. The Income Tax Department may also levy a penalty for other reasons, such as providing false information in the form.

If you are facing any problem while filing Form 71, you can contact us for professional help to use the same.