TDS 101: How Can You Claim It Back
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Personal Finance
- Swati Tripathi
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- 03 min read
#income tax

With various languages involved with the taxation process, TDS is an added one! TDS stands for tax deduction at source. As per the Income Tax Act, any organization or person making a payment is needed to abate tax at the source if the payment exceeds certain threshold limits. TDS must be subtracted at the rates that the tax department specifies. The business or individual making the payment after subtracting TDS is referred to as the deductor, and the business or individual receiving the payment is referred to as the deductee. Before making the payment, the deductor must deduct TDS and deposit it with the government. TDS is taken out regardless of the payment method—cash, check, or credit—and is connected to both the deductor's and the deductee's PAN. TDS deduction is applicable to various types of incomes, including –

  • Salary
  • Commission earned
  • Rent
  • Interest payment by banks
  • Professional or consultant fees

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When is TDS Deducted?

TDS deduction regulations require tax payment when a taxpayer receives real payment or gets a notice of payment due (whichever is earlier). Let's look at a situation where TDS will be deducted. Assume Mr. Ram is a self-employed professional who received an advance payment of Rs. 40,000 and a follow-up payment of Rs. 20,000. In this case, the payee will take TDS from the advance (4%, 10% of Rs. 40,000) and the remainder (2%, 10% of Rs. 20,000) before paying the remainder. The total taxable amount that must be paid is Rs. 6,000.

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The Procedure and Knowhow of Tax Refund

When the taxes paid through TDS are higher than the actual tax due determined for the Financial Year, a TDS Refund results automatically and is determined after combining income from all possible sources, we all, as taxpayers, are bifurcated under various tax slabs. For example, if you have an FD and earn an interest income, your bank will charge a basic 10% of TDS on the interest accumulated. However, if you fall under the 5% tax bracket, you have the full authority to claim a TDS refund for the additional amount deducted. Similarly, you can request a TDS refund for any excess TDS deducted from your pay because your employer did not receive your 80C investment evidence or rent receipts for your housing rent allowance. You would total up all of your income from various sources at the time of ITR filing, determine your tax burden, and deduct any TDS applied to your income. A refund from the government is owed if the TDS is larger than your overall tax liability for the fiscal year. For example: Ram works in an MNC in Gurugram. But he submitted his IDFC premium documentation—which is exempt under section 80C—late. Consequently, an additional Rs. 10,000 was deducted as TDS. Ram has to pay a total of INR 40,000 in taxes for the years 2021–2022. Ram's pay had a tax withholding of INR 50,000. Ram is entitled to a tax refund of INR 50,000 – INR 40,000 = INR 10,000. It is evident from the example mentioned above that Ram was required to pay a total tax of INR 40,000. He has to pay INR 50,000 because he neglected to give his company the insurance premium payment receipt on time, costing him additional taxes. As a result, this is a common circumstance that salaried people encounter every year, prompting the start of the TDS refund process. The sooner you file your income tax return, the sooner your TDS will be repaid.

How To Claim Your TDS Refund

You can compute your taxable income and taxes, file an income tax return (ITR), and claim a refund where the tax deducted does not match the actual tax owed. You will be required to enter your bank's name and IFSC code when filing an ITR. This makes it simpler for the IT division to reimburse you for any additional taxes you paid.

  • If your employer withholds more income tax than is due: By requesting a reduced or Nil TDS certificate from your jurisdictional Income Tax Officer in Form 13 in accordance with Section 197, you can prevent a TDS deduction from your salary if your taxable income is below the basic exemption amount. You can give the TDS deductor the Nil deduction order issued under Section 197. Click here for more information on how to complete Form 13 and apply for a lower tax deduction under Section 197.
  • TDS on Fixed Deposit TDS: To inform your bank that you have no taxable income when your taxable income is below the basic exemption limit, file a declaration in Form 15G at the beginning of the fiscal year. Therefore, no tax (TDS) would be deducted from your interest income. You can request a refund by filing an ITR if the bank withholds tax (TDS) from your interest income, even though you submitted a Form 15G declaration.
  • Senior Citizen holding a FD: Seniors with FD accounts are free from tax deductions (TDS) on interest received from bank deposits if they are 60 years of age or more. However, the exemption applies if the interest on deposits from each bank totals up to Rs 50,000 per year. Suppose your interest income exceeds the threshold limit, but your overall income is less than the basic exemption level (after section 80 deductions). In that case, you can notify your bank that you do not have taxable income by submitting Form 15H at the beginning of the fiscal year. You can request a refund by filing your ITR if the bank continues deducting tax from your FD's interest income. One thing to remember is that the lump-sum amount must be disclosed when declaring fixed deposit income at the time of maturity to avoid paying heavy and higher tax rates (Since it attracts high income for that period). As a result, disclosing income annually is preferable to declaring it when an asset reaches maturity.

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What is the TDS Refund Time Period?

Several variables influence the TDS refund period. For example, receiving your refund might take three to six months if you submitted your ITR information on time. The conclusion of the e-verification will also impact the refund window. You can check with your employer to confirm Form 16, contact your income tax office, or get in touch with the Ombudsman - Income Tax Department if you don't receive your refund by the deadline.

How to File an Income Tax Return or Request a TDS Refund (ITR)

The process for filing income taxes is easy. Visit or click on https://www.incometax.gov.in/iec/foportal/ to get started. To download the appropriate form for an income tax refund, log in or register, fill it out with the necessary information, and submit it. The Income Tax Return forms exist in various categories, and you must select the one that corresponds with your income category.

Interest on TDS Refund

If the income tax department is late in giving you the tax refund that applies to you, Section 200A of the Income Tax Act states that you are entitled to simple interest at the rate of 6% per year on the amount of your refund. This interest begins to build up in April, the first month of any fiscal year. However, interest is not paid if the tax refund is less than 10% of the total tax due for the year. Due to the fact that it is categorized as "income from other sources," interest received on tax refunds is likewise taxable. Now that you are aware of the 101’s pf TDS refund, claim yours if you fall under the bracket!



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