Form 71 TDS: Comprehensive Guide to Filing and Compliance

Introduction

Income Tax Form 71 is a crucial form introduced under Section 155(20) of the Income Tax Act, 1967, to address the issue of TDS mismatches faced by taxpayers. The mismatch occurs because of the timing difference in income declaration and TDS (Tax Deducted at Source) deduction.

The Income Tax system in India operates under the principle that TDS credit should ideally be claimed in the year the income is offered to tax, as per Section 199 and Rule 37BA. However, practical scenarios often lead to situations where income is reported on an accrual basis (when it is earned), but the TDS is deducted and deposited by the payer only when the payment is made, which could be in a later financial year.

This mismatch causes confusion and inconvenience for taxpayers as they are unable to claim TDS credit for income already taxed. To solve this issue, Section 155(20) was introduced, allowing taxpayers to claim TDS credit for such mismatches by filing Income Tax Form 71. This provision is particularly significant for ensuring fairness in tax assessments, reducing administrative hassles, and improving compliance.

Benefits of Income Tax Form 71

Income Tax Form 71 provides several advantages to taxpayers:

1. Accurate TDS Credit Claim
   • Ensures that TDS credit is allowed in the correct assessment year (the year income was offered to tax), even if TDS is deducted later.
   • This aligns the taxpayer’s liability with the actual tax paid, avoiding unnecessary disputes.
2. Simplifies the Process
   • Previously, taxpayers had to approach deductors and request them to revise TDS returns, which was a time-consuming and unreliable process.
   • Form 71 eliminates the need for such follow-ups, shifting the responsibility to the tax authorities.
3. Convenience of Digital Filing
   • Filing Form 71 is entirely electronic, making the process seamless, time-saving, and accessible to all taxpayers.
   • Taxpayers can easily track the status of their application on the Income Tax Portal.
4. Enhanced Compliance
   • By providing a mechanism to resolve mismatches, Form 71 reduces the chances of disputes and penalties, encouraging taxpayers to report income accurately.
5. Fair Resolution
   • Form 71 ensures that taxpayers are not penalized for timing differences in TDS deduction and income declaration, fostering greater trust in the tax system.

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Key Details Required for Filing Form 71

To ensure the smooth processing of Form 71, taxpayers must provide the following information:

1. Personal Details
   • Name, PAN, Address, and Residential Status of the applicant.
2. Assessment and Financial Year Details
   • Assessment Year (AY): The year in which income was declared in the ITR.
   • Financial Year (FY): The year in which TDS was deducted and deposited.
3. Income and TDS Information
   • Total income declared in the relevant assessment year.
   • Specified income for which TDS credit is being claimed.
   • Nature of income (e.g., salary, professional fees, interest, etc.).
   • Amount of TDS deducted and the rate of deduction.
   • Date of deduction and date of deposit to the government.
4. Details of Deductor
   • Name, TAN (Tax Deduction Account Number), and PAN of the deductor.
5. ITR Filing Date
   • The date on which the ITR for the relevant assessment year was filed, confirming that the income was reported.

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Step-by-Step Process for Filing Income Tax Form 71

Here’s how to file Form 71:

1. Log in to the Income Tax Portal
   • Visit https://www.incometax.gov.in/iec/foportal/  and log in with your PAN and password.

• Go to e file – Income Tax Forms – File Income Tax Forms

• Go to “Person not dependent on any Source of Income ( Source of Income not Relevant)” and search Form 71

4. Select the Assessment Year and in the next tab select “ Get Started”

5. Choose Basic Information and Details of computation of income then Fill the details given and Save the form.

Fill in the required details, including:

Personal details.

Assessment and financial year information.

Income, TDS, and deductor details.

Reason for claiming TDS credit.

6. Similarly, Navigate to Attachment and Verification then fill the form

7. Provide the Details Required and Save the Form

8. Upload and Submit
   • Upload the completed form on the portal.
   • Authenticate the submission using:
     • Electronic Verification Code (EVC), or
     • Digital Signature Certificate (DSC).
9. Processing by Assessing Officer
   • Once submitted, the Assessing Officer verifies the application and processes the TDS credit.

Example Illustration

• Scenario:
  Mr. Ramesh, a freelance consultant, declared ₹5,00,000 as income for FY 2020–21 in his ITR for AY 2021–22. His client, however, deducted ₹50,000 as TDS in FY 2021–22 and deposited it in June 2021.
  • Issue: The ₹50,000 TDS appears in Form 26AS for FY 2021–22, causing a mismatch for AY 2021–22.
  • Solution:
    • Ramesh files Form 71 by March 31, 2024, claiming TDS credit for AY 2021–22.
    • The Assessing Officer verifies the application and credits ₹50,000 for AY 2021–22, resolving the mismatch.

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Conclusion

Income Tax Form 71 plays a pivotal role in addressing TDS mismatches arising from timing differences in income declaration and TDS deduction. By leveraging the provisions of Section 155(20), taxpayers can ensure fair and accurate tax credit claims. The introduction of this form has significantly enhanced the efficiency of the tax system, simplified compliance for taxpayers, and reduced administrative hurdles. Form 71 empowers taxpayers to resolve TDS mismatches effectively, reinforcing transparency and trust in the Indian tax regime.