Tax Deducted at Source (TDS) is a type of tax that is deducted from the salary or payment that you are liable to before it is credited to your account. The amount can also be deducted from rent, interest obtained from a bank or commission. TDS is collected by the employer or the bank from their employees or customers based on the government rules. It may be collected each month or at the beginning of the financial year.
In case where TDS is distributed throughout the year, it decreases the tax burden at the end of the financial year. The tax is regulated by the Central Board of Direct Taxes. If the government deducts more than the amount that you have to pay, you can claim for a TDS refund.
What is a TDS refund?
TDS is calculated by combining various income sources of a particular financial year. All taxpayers are categorised under different categories of tax. The need for a TDS refund arises when the income tax that you are entitled to pay to the government and the TDS deducted when the financial year ends, do not match.
For example, banks collect 10% of the interest gained from fixed deposits you have. In case you belong to the 5% tax slab, you can claim excess tax collected by the government. You might also claim excess TDS collected for not submitting the investment proofs under Section 80C.
When you file the income tax return for the current financial year, you are required to add your income from different sources and find out the tax liability. Then, subtract the TDS implemented on your income. If you find out that the TDS amount is more than the total tax liability for the financial year, the government is liable for a refund.
Claiming a TDS refund
Your TDS refund claim will depend on the situations described below:
If your employer deducts more tax than the actual tax liability
In this case, if the TDS deducted from your income does not match the actual payable tax, you can claim a refund by filing an income tax return. You must properly calculate all your sources of income and the associated taxes while raising the claim.
During the process, you will be required to mention your bank account number, name of the bank, branch name and IFSC code of the bank branch. This is important as the Income Tax Department will calculate and pay you back the excess tax that you may have given to the government.
You have to keep in mind another fact. For a financial year, if you know that the TDS deducted is more than the tax payable, you can use Form 13. Under Section 197, Form 13 will allow claiming for a lower tax deduction or nil tax deduction. The document or certificate received from the income tax official has to be submitted to the employer or the tax deductor.
If more TDS is deducted from your fixed deposits
There may be a situation where your income does not fall under the taxable category, but the bank has deducted TDS from your fixed deposits. You can claim a tax refund by declaring your income in the income tax return. In that case, the Income Tax Department will verify and refund the excess amount to the bank.
Another way is by submitting the 15G form to the bank. Post this, the bank will be notified that your income is not taxable and hence, they will not deduct any TDS from your FDs
Senior citizens with Fixed Deposits
In case you are a senior citizen and have a fixed deposit account in a bank, you are excluded from TDS for the income you obtain from fixed deposits. You have to be more than 60 years of age and the tax exemptions are applicable for interests earned up to Rs 50,000 per year.
In that case, you need to submit a 15H form to the bank to notify them that you have no taxable income. No TDS will then be deducted from your account. But in the case where TDS has been deducted, you can claim a TDS refund. You will get the amount refunded when you file your Income Tax return. The IT Department will then calculate the amount that you have paid in excess and transfer it back to your bank account.
Further, you must mention the income from your interests annually rather than during the time when the amount matures. This is because if you mention your income from these interests as a lump sum amount, you may fall under a higher tax category. Hence, you have to pay more taxes.
Steps to claim TDS refund online
Here are the steps to claim a refund online:
• Register on the official website of the Income Tax Department by visiting incometaxindiaefiling.gov.in
• Download the relevant form for filing the income tax return
• Enter the required information in the form and submit it. The ITR 1 form is for salaried and pensioned individuals or people earning from property except for lottery. The ITR 2 form is for the people who earn from capital gains
• After filling the form, you have to provide necessary documents such as TDS certificate, PAN card, investment details, interest documents and Form 16
• After that, you will receive an acknowledgement of the ITR along with a number that you need to verify. You can do this using a digital signature or an OTP based on the number on your Aadhaar card
• In case you are unable to verify the number, you can send the acknowledgement that has your signature, to the Income Tax Department
After you have submitted the TDS claim form, it usually takes 3 to 6 months for the amount to be refunded. It depends upon the time required for completing the online verification of the details. In case of delay in refund, contact your employer or the Income Tax Office.
Steps to check the TDS refund status
The status of your TDS refund can be checked by the following ways:
• You can use your PAN card number to check the TDS status on the website – incometaxindiaefiling.gov.in
• Check your registered e-mail address for an acknowledgement mail sent by the government
• You can call on the toll-free number 1800-4250-0025 of the CPC Bangalore
If you have properly filed the claim form according to the steps mentioned above, you get your refund within a few months. Still, if the Income Tax Department is late in paying back the refund, you are eligible for the amount along with an interest rate of 6%. This is mentioned under Section 24A of the IT Act.
TDS refund is a very simple process. However, you have to be careful while raising a claim for the TDS deducted from your income.