Benefits of TDS Deduction at Source

Benefits of TDS Deduction: TDS is a tax deducted from a person's salary before the amount is credited to his account. The employers deduct this amount each month. If the TDS collected is more than the tax owed to you by the government then you can claim TDS refund.

The TDS method allows taxes to be collected at the source of income. This is deducted by the person making the payment. For example, an owner deducts TDS from the salary paid to an employee. Similarly, a bank deducts TDS on the interest income earned by a customer on his deposits. Let us know about this in depth.

How does TDS work?

The "pay as you earn" model underpins TDS's operations. The person making the payment deducts a certain percentage of tax from the payment and deposits it with the government. The person receiving the payment receives the amount after deducting TDS.

For example, let's say your employer pays you a salary of ₹50,000. ₹50,000 per month. If the TDS rate is 10%, your employer will deduct ₹5,000 as TDS. The remaining amount, i.e. ₹45000, will be given to you as salary.

TDS on salary

TDS on salaries is one of the most common forms of TDS in India. It is deducted by the employer or owner on behalf of the employee. The TDS rate on salary depends on the income and tax slab of the employee. Depending on the tax system selected, the TDS rate might be anywhere between 0% and 30%.

TDS on interest income

TDS is also deducted from interest income earned from various sources like fixed deposits, recurring deposits and savings accounts. The TDS rate on interest income also varies depending on the source of income.

For example, if the interest earned on a fixed deposit is more than Rs. TDS will be deducted at the rate of 10% on ₹40,000 in a financial year. If the interest earned on recurring deposits or savings accounts exceeds Rs. TDS will be deducted at the rate of 10% on ₹10,000 in a financial year.

Income Tax Liability and TDS

TDS is a way of depositing advance income tax. It is deducted by the person making the payment, and the person receiving the payment receives the outstanding amount. TDS, however, does not represent the taxpayer's whole tax obligation. The taxpayer is required to file income tax returns at the end of the financial year, and the TDS amount is adjusted against the final tax liability.

If the TDS deducted exceeds the final tax liability, the taxpayer can claim a refund for the excess TDS deducted. This brings us to the next topic, which is how to claim refund on excess TDS deducted.

TDS Rate

TDS rate is the percentage of tax deducted at source. TDS rate varies depending on the type of payment and nature of payment. TDS rates are determined by the Income Tax Act, and are subject to change from time to time.

For example, the TDS rate on salary varies depending on the income and tax slab. The TDS rate on interest income varies depending on the source of income.

Is TDS refundable? Claiming Refund on Excess TDS Deducted

If the TDS deducted exceeds the final tax liability, the taxpayer can claim a refund for the excess TDS deducted. To claim the refund the taxpayer has to file an income tax return. The excess TDS deducted will be refunded to the taxpayer through direct credit in their bank account.

It is important to note that the taxpayer has to file an income tax return to claim a refund on the excess TDS deducted. If the taxpayer does not file the income tax return, he will not be able to claim the refund.

As mentioned above, if TDS is more than your outstanding amount, you can avail TDS refund. However, not everyone can avail of this refund. Individuals are eligible for TDS refund only if the financial declarations made at the beginning of the year are less than the proof of investment submitted at the end of the year. A notable fact is that the sooner you file your income tax return, the sooner you can get the TDS refund.

What are the steps to file TDS return claim?

If your employer has withheld more taxes than you owe, you must file a TDS refund claim. The difference amount can be claimed by filing income tax return. For this you need to provide bank account number, bank name and Indian Financial System Code (IFSC) details for successful processing. If you know that TDS is payable in any financial year, you need to file Form 13 under Section 197 to avail lower income tax deduction.

How to claim TDS refund online?

Do you know that you can claim TDS refund on your salary online? If you are also wondering how to claim TDS refund on salary, we have got you covered. However, claiming TDS refund online is a simple process and involves filing income tax returns. It involves the following steps:

• Sign in or sign up to the online e-filing portal of the Income Tax Department,
• Fill the relevant details in the applicable Income Tax Return (ITR) form.
• On submission of ITR, the portal generates an acknowledgement.
• E-verify the acknowledgment through digital signature, net banking account or Aadhaar-based one-time password (OTP).

How to claim TDS refund from bank?

Another thing you need to know is how to claim TDS refund in case of deduction by the bank. If the income tax is low but the bank has deducted more tax on your fixed deposit, you can claim the refund in two ways:

One way is to declare income and file I.T. The department will return the amount to the bank account.

Another way is to file Form 15G in the bank so that there is no deduction at source as your salary does not fall under any tax slab. Also, senior citizens are exempted from paying TDS on fixed deposit interest.

How to apply for TDS exemption or Income Tax Return (ITR)?

The topic of "How to apply online for TDS refund in India" is another frequently questioned one. As mentioned earlier, the TDS refund process is quite straightforward and involves following some easy steps. To download the relevant form for income tax refund, you just have to visit the income tax portal and log in. After that, fill out the form completely and submit it. If the employer has deducted tax when you are not eligible for it, you can claim the amount by filing Income Tax Return (ITR). The department will review the taxable amount, and you will receive the amount directly in your bank account.

How to check TDS refund status?

Visiting the online e-filing portal helps to know the status of the refund. You can do this by following the steps mentioned below:

• Log in to your account.
• Look for the section labeled ‘My Account’ and select ‘Refund/Demand Status’.
• It shows the assessment year, position and mode of payment. In case of rejection, the respective reason is also mentioned here.

How to verify TDS refund status?

If you do not receive the TDS refund in the above mentioned time frame, you can follow the steps given below:

• Download Form 26AS, then match the information with your TDS details and revenue. In case of any mismatch, contact the TDS deductor to check the accuracy of the TDS return filed by him.
• Contact the concerned Income Tax Officer or Ombudsman. Their contact details are available on the online e-filing portal.

What is TDS refund period?

If ITR is filed on time, you can expect the refund to be credited to your bank account in three to six months. Credit is also a function of completing the formalities of E-Verification. When the amount of tax deducted exceeds the actual tax liability, TDS refund is issued. Investment forecasts made at the beginning of a financial year generally do not match actual investments made at the end of that year. When there is a difference between the total tax deducted at the end of a financial year and the amount of income tax you are required to pay for that year, you will receive a TDS refund.

What are the steps to lodge a complaint regarding delay in receiving ITR?

You should receive your refund within 30-45 days of filing your Income Tax Return (ITR). However, there are a number of reasons why your refund may be delayed.

If you have not received the refund even after applying for ITR, you will have to contact the officer to file a dispute. Provide all information and details. If no response is received, you can approach the Income Tax Ombudsman with your PAN, Form 16, bank statement, TDS certificate issued by the bank and documents showing earnings and investments.

How much interest is there on TDS refund?

In case of delay in returning the TDS amount, the Income Tax Act entitles you to receive interest. Interest is calculated at a simple rate of 6%. Accumulation of interest occurs from the first month of the financial year, i.e. April, and is taxable under ‘Income from other sources’. However, interest is not applicable where the refund amount is less than 10% of the total tax payable.

What are the measures to avoid double claims?

While approving the refund, the Assessing Officer takes due precautions to avoid double claims. If you find an error while claiming a refund, you must have supporting documents to prove that it was genuine. To prevent both the deductor and the deductor from claiming TDS twice, the Assessing Officer should take the following precautions:

Before the Assessing Officer, the application deductor must demonstrate that:

• there was a genuine error that occurred unintentionally
• Deductees have not received TDS certificate for the requested refund amount
• The excess amount as credit has not been claimed by the deductee in the return of income or the deductor has agreed not to claim it.

How can I get my TDS deduction on PF withdrawal back?

If an EPF member has less than ₹2,50,000 in a financial year, he is entitled to claim EPF refund on withdrawal. For this, the concerned taxpayer has to show the EPF withdrawal as salary income while filing his tax return.

How to claim TDS refund on salary?

TDS on salary is a tax deducted from the employee's salary by the employer. As a result, your employer deducts your money and deposits it with the government on your behalf. Follow the steps given below to get TDS refund on your salary:

If your employer deducts TDS in addition to your actual tax payable, you have to file an income tax return. Provide bank account number, bank name and IFSC code. It takes a few months for the Income Tax officer to approve your income. Tax return after filing income tax return to claim TDS refund.

How to claim TDS refund for previous years?

Apply to the Chief Commissioner of Income Tax Department. File the ITR form of the previous years for which you require a refund. Get approval from the concerned authorities. Accept late applications for supplementary claims for waiver.

Conclusion

If you have missed claiming a refund while filing the return, you can file a revised return. Now that you are aware of the TDS refund process, you can proceed and claim your rebate.

Key Information

• TDS refund occurs when the TDS deducted by you is more than the tax payable by you.
• You can file Income Tax Return (ITR) to claim TDS refund.
• While filing ITR, you need to provide your bank account details so that the refund can be credited directly to your account.
• It usually takes 3 to 6 months to receive TDS refund.
• If you do not get the refund, you can contact the Income Tax Department.