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 Sandeep's 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.
What is Income Tax Refund?
Being subject to income tax, we declared our projected investment amount at the beginning of each financial year. However, there are many times that the declared amount wouldn’t match the actual investment amount due to various factors. It could be because of investments that started in the middle of a financial year or difference in income due to other factors. In instances where an individual has paid more tax than required for a financial year, the government provides an option to apply for a Income tax refund.
How to apply for TDS Refund or Income Tax Return (ITR)?
The process for income tax return is simple, all you need to do is, visit the website - https://incometaxindiaefiling.gov.in/, login or sign-up to download the relevant form for refund of income tax, enter all the particulars in the form, and submit it. The ITR forms are available for various categories, you would need to choose the form that is applicable for your income category.
How does ITR work?
If the scale of your income is not applicable for income tax and your employer had deducted a certain amount of money as tax, you can recover that amount by filing the ITR form. The ITR is also applicable for a situation where you have paid more than the required tax amount. Based on the details provided you, the Income Tax Department will calculate and review the taxable amount. If you are eligible for a refund, you will receive the excess amount in your bank account directly or as a cheque in your name.
You will be eligible for a 6% interest on your ITR amount if the refundable amount is more than 10% of the total taxable amount.
The procedure for raising a complaint about delay in receiving ITR
Even after applying for ITR, if you haven’t received your refund or there is a delay in receiving the refundable amount, you can get in touch with your Income Tax Officer to file a dispute. You will need to contact your Income Tax Officer in writing with all the necessary details and documents. If you do not receive a satisfactory response or any response for that matter, you can contact the Income Tax Ombudsman with the following details –
- Your PAN number
- Form 16
- Bank statement
- TDS certificate issued by your bank, and
- All the documents that show the investments and earnings
In order to initiate the e-filing process, you would need to login or register yourself on the Income Tax Department's website - https://incometaxindiaefiling.gov.in/. Once you have registered, you can choose to either download the relevant form and upload it back once you have completed or you can also fill the details online. The ITR-1 form is applicable for individuals earning a salary, pension, or income from property or other sources except for lottery. The ITR-2 form is applicable for individuals who are earning capital gains. The ITR-2 is applicable for a situation where there are no capital gains, however, the individual owns more than one house/property. For professionals and business owners, the ITR-3, ITR-4, and ITR-4S can be used.
When you have completed filling up the form, you will need to provide documents such as PAN, Form 16, TDS certificate, interest statements, and details of investments. Once the documents are submitted, you will receive an acknowledgement number. If you have used the digital signature, you won't require taking any further action but if you have submitted the forms without a digital signature, you will receive an email with ITR V that is essential for completing the verification for ITR. You can either verify the document online or send a physical copy of the ITR V to Income Tax Department with your signature on it.
TDS refund status
You can check the TDS refund status by the following methods:
- An acknowledgment e-mail sent to your registered e-mail address
- By using the PAN card number on the website - https://incometaxindiaefiling.gov.in/
- By calling CPC Bangalore on 1800-4250-0025 (toll-free number) in order to check the status.
TDS refund period
The TDS refund period depends on various factors. If you have filed the ITR details on time, it can take anywhere between three to six months to receive the refund. The refund period will also depend on completing the e-verification. If you do not receive your refund on time, you may check with your employer to verify the Form 16, contact your Income Tax Office, or get in touch with Ombudsman - Income Tax Department.
Please refer to https://incometaxindiaefiling.gov.in for more information related to ITR or TDS refund.
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 you've paid.
Quick Tip: For any financial year, if you're 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 you've 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 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
Frequently Asked Questions: TDS Refund
- Will I get a TDS refund even if I have not provided my bank account details in the TDS Certificate or Income Tax Return?
A) Your correct bank account details should be provided in your TDS Certificate or ITR to allow the Income Tax Department to transfer the refund amount through NEFT directly to your account. Any mistake in the bank account could lead to either transfer of the amount to someone else or delay and non-transfer. If you have not provided a bank account number, you must ensure that at least the address you have mentioned in the ITR/linked to PAN is correct, because the tax department might send you a cheque of the refund amount.
- How do I change my address so that I don't miss the refund cheque?
A) You can log in to the Income Tax E-Filing portal and raise a Refund Re-issue Request. But this can be done only if you did not receive the refund cheque and it was returned to the Income Tax Department. If someone else has collected it in your name, then the taxman will no longer be responsible for the amount. The Refund Re-issue Request can be found in the '˜My Account' option on the e-filing portal. You can choose your mode of refund receipt '“ Electronic Clearance Service (ECS) or cheque. You can change both the address and bank account number through this option. This information will be updated for all income tax-related documents.
- Is there an option to change contact details from what I provided in the ITR?
A) Yes. On the Income Tax e-filing portal, on the '˜Profile Settings', you will find '˜Update Contact Details'. You can change your address, email id, and mobile number through this option.
- What are the different kind of refund statuses that I may see in my e-filing portal profile?
A) The Income Tax e-filing portal has 11 status options for your refund amount. They are:
- No e-Filing has been done for this assessment year: If ITR was filed physically and not online, then the status will not be displayed in your profile on the website. This might also mean that haven't filed your ITR at all.
- Not determined: The I-T Department is yet to process your return and a refund amount has not been ascertained.
- Refund paid: The refund has been dispatched. If you haven't received it, check with your bank and your nearest post office. Also check your address and bank account number on the e-filing profile to confirm that there is no mistake.
- No demand no refund: The tax deduction was perfect and the I-T department owes you nothing. If you had claimed refund and this status shows up, it means the taxman's calculations were different from yours and the department does not think it owes you anything. If there are any errors in your ITR, you can either rectify or revise it online.
- ITR processed, refund determined and sent out to Refund Banker: The refund is being processed, so just wait a little more.
- Refund unpaid: Either your bank account number or your address is wrong and the department could not deliver the refund to you.
- Contact jurisdictional Assessing Officer: The department needs clarification or more information on your income tax return and you must get in touch with your jurisdictional AO for more details.
- Demand determined: Your refund request has been rejected and you have been found to owe the department more money as tax. If they are right, you need to follow the procedure suggested by the taxman and pay the dues before deadline. But if you made any mistake in the ITR, you can either rectify or revise it with the correct details.
- Rectification processed refund determined and sent out to Refund Banker: If you had filed an ITR rectification request it has been accepted and processed.
- Rectification processed demand determined: If you had filed a rectification, it has been accepted but the department still thinks you owe them some more money in taxes. You will need to pay the amount within 30 days of receiving a notice on this.
- Rectification processed no demand no refund: If you had filed a rectification, it has been accepted but the department estimates that there is no tax dues or refunds in your case.