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Tax Deducted at Source, abbreviated as TDS is the amount that is deducted at source, i.e. from the income of an Indian taxpayer, be it salary, income from savings accounts, or rent. The Income Tax Act, 1961, governs the collection of TDS tax from the taxpayers, while the Central Board of Direct Taxes (CBDT) manages the related operations[1]. If you pay more TDS than what you owe to the tax department, you can get a TDS refund. Let’s explore the concept of tax refund in detail.
What is TDS Refund?
TDS refund is about getting a part of the paid TDS tax back into your account by the Government. It happens when you have paid more TDS or tax than the actual tax liability in a specific financial year. It can be due to the difference between tax saving investment projections made at the beginning of the year and actual projections made till the end of the financial year.
TDS refund process starts by calculating the sum to be refunded by consolidating your income from various sources [2]. In the next step, you need to assess the tax payable on your net taxable income. Calculate the difference in the tax already paid or TDS deducted and the tax payable on your net taxable income. Once you are done with all the calculations, you can file your income tax return online to avail TDS refund.
Example
Say, you live in a rented home with your family. You could not submit the required Section 80C investment proofs or rent receipts towards HRA (House Rent Allowance) on time when asked by your employer, which led to excess TDS deduction from your salary. In such a situation, you can claim a TDS refund.
Next to understand what TDS refund is, comes the TDS refund procedure to claim it.
How to Claim TDS Refund?
Mainly, there are 3 instances in which you can claim TDS refund. Knowing about these instances in detail will help you understand how to claim TDS refund online or offline.
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1. When More Tax Has Been Deducted by The Employer Than Applicable
a) If the actual tax payable does not equal the tax deducted at source, you need to calculate your income and taxes, file an Income Tax Return (ITR) [3]to claim TDS refund.
b) While filing the ITR online, you will need to provide the details of a bank account and its IFSC code. The Income Tax (IT) department will then use these details to give you a TDS refund.
Read more: TDS on Salary
a) If the actual tax payable does not equal the tax deducted at source, you need to calculate your income and taxes, file an Income Tax Return (ITR) [3]to claim TDS refund.
b) While filing the ITR online, you will need to provide the details of a bank account and its IFSC code. The Income Tax (IT) department will then use these details to give you a TDS refund.
Read more: TDS on Salary
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2. When A Bank Has Deducted Tax on Fixed Deposit (FD)
a) When your income does not fall into a taxable income bracket, you need to submit a declaration in TDS refund form - Form 15G[5] to your bank in which you have an FD before the end of every financial year.
b) This is done to notify the bank about your non-taxable income, because of which TDS should not be deducted on the FD interest income.
c) If your bank has deducted TDS on your FD interest, whether you have submitted TDS refund form or not, you can claim TDS refund by declaring it in your ITR. The IT Department will compute TDS refund and get it credited to your bank account.
Read More: TDS on Fixed Deposit
3. When You Have FD Accounts, Being a Senior Citizen
a) As per Income Tax Act, Indian citizens above the age of 60 years are exempt from a tax deduction on FD interest up to Rs. 50,000 annually[6]
b) If you are above the age of 60, have FD accounts but no taxable income in any financial year (after claiming this deduction on FD interest), you need to fill and submit Form 15H to your bank
c) If the bank still deducts tax on the interest income you have earned with the FD(s), you can claim a TDS refund while filing the ITR
See how the latest budget impacts your tax calculation. Updated as per latest budget on 1 February, 2020. No deductions will be allowed under the new tax regime.
How to Check TDS Refund Status?
You can look into the TDS refund claim status in the following ways:
a) Check the acknowledgement and refund processing email sent to your registered email address by the IT Department. It clarifies the TDS refund claim status.
How to Check TDS Refund Status?
You can look into the TDS refund claim status in the following ways:
a) Check the acknowledgement and refund processing email sent to your registered email address by the IT Department. It clarifies the TDS refund claim status.
b) Use your PAN card number to check the TDS refund status on –
https://incometaxindiaefiling.gov.in/
c) Call CPC Bangalore on their toll-free number - 1800-4250-0025.
Read more: TDS Refund Status
b) Use your PAN card number to check the TDS refund status on – https://incometaxindiaefiling.gov.in/
c) Call CPC Bangalore on their toll-free number - 1800-4250-0025.
Read more: TDS Refund Status
What is TDS Refund Period?
TDS refund period refers to the time it takes to get the excess tax paid back. Next to knowing what TDS refund period is, you must know the factors on which it depends, which are:
1. Completion of e-verification
2. ITR filing date
In general, it takes around three to six months to receive a TDS refund provided you file the ITR on time.
In case you do not receive the refund, you need to check with your employer for verification of Form 16 and Form 26AS (TDS Summary Statement), then contact your Income Tax Office to get in touch with the Ombudsman – IT Department to raise a complaint.
What Do You Mean by Interest on TDS Refund?
As per Section 244A of the Income Tax Act[7], you are entitled to get a simple interest of 6% per annum of the TDS refund amount if the IT department fails to pay you the applicable refund on time.
The interest on TDS refund accrues from the first month of the assessment year when you have filed the ITR within the due date.
What Do You Mean by Interest on TDS Refund?
As per Section 244A of the Income Tax Act[7], you are entitled to get a simple interest of 6% per annum of the TDS refund amount if the IT department fails to pay you the applicable refund on time.
The interest on TDS refund accrues from the first month of the assessment year when you have filed the ITR within the due date.
Some other facts you must know about interest on TDS refund are:
a) You will not get it if it is less than 10% of the total income tax payable in a year
b) Interest on tax refund is also taxable, being considered an income from other sources
Some other facts you must know about interest on TDS refund are:
a) You will not get it if it is less than 10% of the total income tax payable in a year
b) Interest on tax refund is also taxable, being considered an income from other sources
Common Tax Filing Hassles and How You Can Avoid Them
1. Rushing to Plan the Taxes in the Eleventh Hour
Many taxpayers leave tax planning needs to the end of a financial year and face last moment hassles. To prevent that from happening, you must plan your taxes in advance with the start of every financial year.
2. Paying Late Tax Payment Charges
The IT department charges a penalty to the taxpayers in case they fail to pay the taxes within the due date. This penalty equals 1% per month of the tax due. You can avoid paying the fine by remembering to pay the taxes on time always.
3. Not Managing TDS Smartly
It is possible to avoid TDS refund-related hassles and delays by managing the taxes smartly. Make sure that TDS deducted equals the actual tax payable.
4. Not Having Required Knowledge of All Tax Exemptions
To save maximum tax, you must be aware of various tax exemptions rules and sections of the Income Tax Act. With this information, you will find it easier to know about the tax exemptions you can claim.
FAQs About TDS Refund Process
Q. What can cause delays or non-transfer of TDS refund?
A. To avoid any delay or non-transfer of TDS refund, you must provide the correct bank account details in the TDS certificate or ITR. These details allow the Income Tax department to transfer the TDS refund via NEFT to your account.
Any mistake in providing the bank account details may lead to transferring the amount to someone else or delay. If you have not provided the bank details, you must ensure you have filled the correct address while filing the ITR. It is because the IT department might send TDS refund in the form of a cheque to you.
Q. How can I change my address so as not to miss getting TDS refund via cheque?
A. To change the address, you need to login to your account at the Income Tax e-filing portal. Within your profile, you can change both the address as well as the bank account details. Once the changes are made, they will be updated on all income-tax related documents.
Through your user account, you can also raise refund re-issue requests if you did not receive the TDS refund cheque and it was then returned to the IT department. You can find this request option in the ‘My Account’ section on the portal.
You must also know that if someone else has collected TDS refund cheque in your name, then the department is no longer responsible for the refund amount.
Q. Can I change my contact details from what I have provided while filing the ITR?
A. You can change the contact details on the Income-tax e-filing portal. Log in to your account, reach ‘Profile Settings’, and click on the option of ‘Update Contact Details’. This way, you can change your registered address, email address, and contact number.
Sources:
[1]:https://www.incometaxindia.gov.in/pages/about-us/central-board-of-direct-taxation.aspx
[2]:https://www.incometaxindia.gov.in/Pages/tools/tds-calculator.aspx
[3]:https://www.incometaxindia.gov.in/Pages/tax-services/file-income-tax-return.aspx
[4]:https://www.incometaxindia.gov.in/Rules/Income-Tax%20Rules/103120000000007378.htm
[5]:https://www.incometaxindia.gov.in/Forms/Income-Tax%20Rules/103120000000007845.pdf
[6]:https://www.india.gov.in/people-groups/life-cycle/senior-citizens/tax-exemption-interest
[7]:https://www.incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2005/102120000000020131.htm
Disclaimer:
Save 46800 on taxes if the insurance premium amount is Rs.1.5 lakh per annum and you are:
- Regular Individual
- Fall under 30% income tax slab having taxable income less than Rs. 50 lakh
- Opt for Old tax regime
ARN:- Aug21/Bg/18AA
