ITR: Even though the government has withdrawn the announcement of a change in interest rates of small savings schemes in the last few days, new rules have come for people investing in these schemes. The Government of India has implemented the new TDS Act on Small Saving Schemes. TDS will be deducted if investors withdraw money from post office schemes, PPF account for more than Rs 20 lakh and are not filing ITR for three consecutive years.
The TDS will be 2% of the amount exceeding Rs 20 lakh withdrawn from the Post Office schemes during a financial year.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 provision under Section 194N of the Income Tax Act 1961 came into effect from 1 July 2020. Even tax filers have not been spared the TDS. If cash withdrawals exceed Rs 1 crore by an ITR filer in a financial year, the TDS will be 2% of the amount above `1 crore.
But the new TDS has been revised in such a way that more and more people fill the returns. At the same time, this rule will also put pressure on taxpayers to pay taxes. There are a large number of people who do not show interest earned in tax returns.
The new TDS rules are designed to put an end to these dodgy practices and push more people to file their tax returns. It will also force tax filers to declare such investments in their tax return. Even though PPF interest is tax free, it has to be declared in the tax return under the head ‘exempt income’. Most people don’t declare the interest income in their tax return.