Claim TDS credit deducted in next assessment year for income offered in earlier year [Read section]
Assessee faces an issue where deductor would deduct TDS in different assessment year for various reasons such as: Following cash method of accounting or recording invoice in books of accounts in next assessment year etc. and because of which assessee could not claim credit of such TDS in his income tax return.
If the TDS is deducted in an assessment year earlier to the one in which the income is offered to tax, assessee has an option to carry forward TDS credit to next assessment year and claim the credit. However, if TDS is deducted in next assessment year then there was no mechanism to claim the credit in the year in which income is offered to tax or later as in the year in which income is offered to tax there is no mechanism to claim the credit of tax deducted in future and in the year in which tax is deducted income tax department won’t allow credit considering section 199 of the Act.
Section 199 of the Act deals with allowing credit of tax deducted and the period in which such credit is allowed has been mentioned in rule 37BA of the Income tax rules. Relevant sub Rule 3 of Rule 37BA is as under:
“(3) (i) Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable.”
Hence, if income is offered in one year and TDS is deposited in next year then no credit would be available in future.
To resolve this issue Income tax department has inserted Section 155(20) which is as under:
“(20) Where any income has been included in the return of income furnished by an assessee under section 139 for any assessment year (herein referred to as the relevant assessment year) and tax on such income has been deducted at source and paid to the credit of the Central Government in accordance with the provisions of Chapter XVII-B in a subsequent financial year, the Assessing Officer shall, on an application made by the assessee in such form, as may be prescribed, within a period of two years from the end of the financial year in which such tax was deducted at source, amend the order of assessment or any intimation allowing credit of such tax deducted at source in the relevant assessment year, and the provisions of section 154 shall, so far as may be, apply thereto and the period of four years specified in sub-section (7) of that section shall be reckoned from the end of the financial year in which such tax has been deducted:
Provided that the credit of such tax deducted at source shall not be allowed in any other assessment year.”
To claim such credit CBDT has prescribed rules under notification no. 73 of 2023 Dt. 30.08.2023 wherein a new rule 134 has been inserted and Form No. 71 shall be used to claim such credit before AO.
Form No. 71 shall be filed online on e-filing portal.
To read more about the notification CLICK ME.
The above section and Form shall be made effective from 01.10.2023.
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