When and How to claim TDS Refund

In case of excess deduction of tax at source, claim of refund of such excess TDS can be made by the deductor. The excess amount is refundable as per procedure laid down for refund of TDS.

The difference between the actual payment made by the deductor and the tax deducted at source or deductible, whichever is more will be treated as the excess payment made. This amount is to be first adjusted against any existing tax liability under any of the Direct Tax Acts. After meeting such liability, the balance amount is to be refunded.

When TDS refund can be claimed:

  1. When the amount you are supposed to pay as tax in a year is lower than the amount already deducted as TDS, you are eligible to claim a TDS refund.
  2. When you fall below the minimum taxable limit and yet TDS has been deducted.

How TDS refund can be claimed:

There is no specific refund process or form to claim TDS refunds. You must file your income tax returns in the normal manner. The excess of TDS over what you are supposed to pay as tax in the year will be the refund amount due, and this needs to be shown in the returns filed. The TDS refund is processed by the Income Tax department within a few months of filing returns. Usually, it takes about 6 months time.

The Income Tax department processes the refund amount along with an interest of 6% per annum in some cases. The refund is usually given in the form of a cheque. However, with effect from AY 2015-16, all refunds will be made in electronic form, directly to the bank account of the assessee, which is required to be mentioned while filing the returns.

10 Things about SMS alerts on Salary TDS Deduction

Here are 10 things to know about sms alerts on Salary TDS Deduction:

1) As many as 2.5 crore salaried taxpayers will now receive SMS alerts from the Income Tax Department regarding their quarterly TDS deductions. The tax department plans to offer this facility on a monthly basis and extend the service to 4.4 crore non-salaried tax payers.

2) The tax department has asked taxpayers to update their mobile numbers in their tax e-filing accounts so that they can receive this service.

3) Tax experts have welcomed this initiative, saying that it will help increase transparency. “A common case is when TDS is deducted from your salary but deposited with an incorrect PAN. Or employer fails to deposit TDS and hence the employee cannot take credit of it. Many a times when people switch jobs, TDS deducted by two employers falls short of their actual tax liability,” said Preeti Khurana, chief editor of portal ClearTax.

4) TDS mismatch is one of the most common reasons for incorrect tax returns being filed, say tax experts.

5) “The new service will benefit the employees as any such inconsistency can be traced well in advance and the employee can approach the employer to rectify those. Earlier, the employee would have to wait till the year end to get the Form 16 and check if all the TDS credits are duly recorded particularly when the employees are not aware that they could view the Form 26AS on a real time basis,” said Sandeep Sehgal, director tax and regulatory at Ashok Maheshwary & Associates LLP.

6) TDS deducted on your salary as well as other payments can also be viewed by downloading Form 26AS from the tax department’s website.

7) Under TDS, tax is deducted at the origin of income. For the salaried class, the tax is deducted by the employer and is remitted to the government on behalf of the employee.

8) The provisions of deduction of tax at source are applicable to several payments such as salary, interest, commission, brokerage, professional fees, royalty, contract payments, etc.

9) The employer is required to compute at the beginning of the financial year, the total salary income payable to an employee during the financial year. After considering the exempted incomes, deductions and relief, the tax liability of the employee is determined on the basis of tax rates in force for the financial year. Every month, 1/12th of this net tax liability as computed above is required to be deducted as part of TDS.

10) The responsibility to deduct tax from salaries arises only at the time of payment. Thus, when advance salary and arrears of salary are paid, the employer has to take the same into account while computing the tax deductible. Similarly, if the employee makes certain investments which qualify for deduction or rebate and furnishes the required proof which reduces the tax liability, the employer can accordingly reduce the quantum of TDS. From this year, the tax department has introduced a new form – Form 12BB – which will be used by employees to declare their investments and claim tax deductions.