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How to Claim TDS Refund - Excess Paid or Interest on TDS Refund

TDS or Tax Deducted at Source is the amount of tax that is deducted from your salary by your employer or the deductor. Most of the time, TDS is deducted
each month by employers based on tax projections declared by the employee at the beginning of each financial year.
The significance of TDS lies in the fact that it facilitates the following five things
Regulates the collection of taxes
Ensures a regular income to the government
Lightens the burden of one-time tax payment and instead spreads the whole tax over several months making it easier for the tax-payer
Provides a convenient mode of tax payment to the payer
Spreads the reach of income tax collection without the Income Tax Department having to do it all by itself

What is TDS Refund?

Many a times it is seen that investment projections declared during the start of a financial year do not match with the actual investments made at the end of
that year.
If there is a mismatch between the total tax deducted at the end of a financial year and the income tax you are supposed to pay for that particular year, a TDS
refund arises.

TDS Refund Example:

Sandeep works at an MNC in Bangalore. Last year he was late submitting his documents for LIC premium exemption under section 80C. As a result, his
company deducted around Rs.10,000 extra as TDS.
Total tax payable by Sandeep for year 2013-2014 = Rs.30,000
Tax deducted by employer from Sandeeps salary = Rs.40,000
Tax refund Sandeep is eligible for = Rs.40,000 Rs.30,000 = Rs.10,000
His total income tax paid for last year turned out to be Rs.30,000 when actually it should have been just Rs.20,000. He ended up paying extra because he
could not get his LIC premium receipts on time.
Similarly, Arun could not invest the Rs.40,000 within the timeline set by his employer. He just could not decide on whether to get a long-term fixed deposit or
avail a life insurance policy. While he picked his brain about this decision, he missed the cut-off date for tax proof submissions as set by his employer.
Eventually he ended up paying more tax even when he did invest that amount before the financial year closed.
These are typical situations that are faced by a lot of people almost every financial year. The only way to get back this extra tax is to file your income tax
return. The sooner you file your income tax return, the faster the returns are processed.

Claiming TDS Refund:

In case your employer deducts more tax than applicable to you as per your IT return filing
As discussed in the example above, a mismatch between tax deducted by employer and the actual tax payable is taken care of when you file your IT
return. When you file your income tax return, you are supposed to quote your bank name and IFSC code. This makes it easier for the income tax
department to return the excess tax youve paid.
Quick Tip: For any financial year, if youre sure that the TDS deducted will surely be more than the total tax payable by you, then under section 197
you can file Form 13 in advance for lower or nil TDS deduction. The response certificate received by income tax officer can then be submitted to the
authority who is supposed to deduct TDS for you.
If your income is below the tax slab and your bank deducts tax on your fixed deposit.
In case your income does not fall under the income tax bracket and your bank has deducted tax on your fixed deposit interest, you can recover the tax
amount in two ways. First is to declare it in your IT return form and the income tax department will automatically compute the refund and credit it to
your bank account.
Second way is to fill form 15G and submit it in your bank telling them that your salary is below tax slab and hence no tax should be levied on it.

If your are a senior citizen with fixed deposit accounts:

Senior citizens are exempt from tax deduction on interest earned on fixed deposits. If you are above 60 years of age and have fixed deposit accounts,
you are required to fill and submit form 15H to ensure that bank does not deduct income tax on the FD interest earned.
Alternatively, you can get the refund credited to your bank account when you file your IT return. The IT department then calculates the tax applicable
to you and adjusts the excess tax paid and credits it back to the bank account youve mentioned in your IT return form.

Quick Tip: When you declare your interest income from fixed deposits at the time of maturity, you declare it as a lump-sum amount. This can result in
a hefty tax amount payable and also a higher tax slab (as your income goes up over a period of time). Hence, it is prudent to declare interest income
yearly rather than at the time of deposit maturity.

Interest on TDS Refund

Under Section 200A of the Income Tax Act, if the income tax department is late in paying you the tax refund applicable to you, then you are entitled for a
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simple interest of 6% p.a. on your refund amount. This interest starts accruing from the first month i.e. April of any financial year. However, interest is not
paid out if the tax refund is less than 10% of the total tax payable in a year.
The interest earned on tax refund is also taxable since it is considered under income from other sources.

How to Avoid Tax Filing Hassles?

You can avoid a host of tax issues if you take care of a few simple points.
Plan your taxes in advance so that you do not have to rush into it at the eleventh hour. It is a good idea to start planning as soon as a financial year
begins
Avoid paying late tax payment charges which are 1% of the tax due
Manage your tax smartly so that the TDS deducted is almost equal to the tax payable by you. You can avoid refund hassles and delays if you plan your
tax this way
Know all tax exemptions you are eligible for and claim them if required

News About TDS Refund

Online Correction of TDS made
simpler by I-T Department
The I-T department announced on Thursday that it has simplified the process of online rectification of incorrect details of tax deducted at source (TDS)
filed in income tax returns. In a move that will ease the burden of compliance on taxpayers seeking rectifications due to TDS mismatch, the finance
ministry stated that a new facility has been provided for pre-filling of the TDS schedule while submitting an online rectification request on the e-filing
portal. This will facilitate easy correction or updation of TDS details as well as cut down on delays in processing of such applications.

6th January 2016.

Income Tax Department brings tds

refunds online
The Income Tax Department, in a bid to simplify taxes has introduced an online portal to aid taxpayers. While the department has evolved over the
years in terms of simplifying the tax payment process, the refund status was often a step behind. To counter this, the IT department has turned to the
internet to speed up the entire refund structure. Individuals can now raise a request for reissue of refund which has returned to the department by
logging onto the official portal of the income tax department. One needs to log on to www.incometaxindiaefiling.gov.in to request for this refund,
providing the necessary details. One can also write a letter to CPC to request for the re-issue of refund, providing all relevant information.

16th September 2015

Consumer Disputes Commission: TDS

cannot be deducted on Interest
A judgement passed by the Uttarakhand State Consumer Disputes Redressal Commission has stated that deducting TDS on the sum of interest paid to a
consumer in compliance of a decree passed by consumer courts is not allowed. This judgement was passed on the basis of a case against a builder who
was guilty of not delivering the promised service. This judgement has opened up a new interpretation to the word interest, which is not the same as
defined in Section 2 (28-A) of the Income Tax Act. This new definition does not allow tax to be deducted at source under Section 194A of the IT Act.
Interest, in this context could also mean compensation which is to be given to the aggrieved and the word interest is just a simple method to calculate
the compensation due.

27th August 2015

TAX

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