TDS Refund

TDS (Tax Deducted at Source) is the amount deducted directly from your income—like salary or bank interest—by the payer and deposited with the government. If the TDS deducted is more than your actual tax liability for the year, you can claim a refund while filing your Income Tax Return (ITR). This article explains what a TDS refund is, how to claim it, and how to avoid common mistakes during the ITR process.

A TDS refund claim can be made when a taxpayer’s tax liability is lower than the actual taxes paid in a given financial year. TDS refund is calculated after income from all sources is consolidated and accounted for.

Let us understand TDS refunds through an example. Imagine you open a fixed deposit with a financial institution and earn interest income on it. The institution deducts 10% as TDS on your interest earnings. If your total income throughout the financial year falls in the 5% tax slab, then for the additional amount, you may be able to claim a TDS refund.

When you file your income tax return, you must consolidate your income from all sources to determine your tax liability. From this, you can subtract the TDS that has been deducted, and if the TDS comes out to be greater than the tax liability, you can claim a TDS refund.

What is TDS

Tax Deducted at Source (TDS) is a tax collection mechanism where the payer, such as an employer, bank, tenant, or client, deducts tax before making a payment to the recipient. This helps the government collect taxes throughout the financial year rather than receiving them as a lump sum at the end.
 

In some cases, TDS is deducted based on estimated income, which may result in excess tax being paid. If your actual tax liability is lower due to deductions, exemptions, or lower taxable income, you can claim the excess amount as a TDS refund. After you file your Income Tax Return (ITR), the Income Tax Department calculates your final tax liability and processes any eligible refund accordingly.

When can you claim a TDS refund?

You can claim a TDS refund in situations where excess tax has been deducted:

• Excess TDS by employer: If your employer deducts more tax than your actual liability, or your income falls below the basic exemption limit, you can claim the excess by filing your Income Tax Return (ITR).
• TDS on fixed deposits: Banks may deduct TDS on FD interest. Individuals below 60 can submit Form 15G, while senior citizens can submit Form 15H to avoid TDS. If tax is still deducted despite eligibility or form submission, you can claim a refund through your ITR.

Having an active savings account ensures faster and smoother credit of your refund once processed.

Now that the meaning of a TDS refund is clear, let us look at the actual process of claiming a TDS refund. When you file your ITR, you will need to input your bank details, including your IFSC code. This is so that the TDS refund can be directly transferred to your bank account. Let us take a look at a few situations when you can claim a TDS refund:

1. Salary TDS deduction higher than payable income tax

When your income is less than the baseline of the tax exemption limit, the TDS deduction can be avoided. Companies deduct advanced TDS from all salaries and report it with 24Q TDS.

However, when the TDS is higher than the actual tax liability, an ITR must be filed to claim a TDS refund. Filing the ITR would require inputting your bank details to receive a refund.

2. FD interest TDS deduction

If your income is less than the baseline exemption limit, you can submit Form 15G at your bank when a financial year starts. With this form, you declare that your taxable income is lower than the baseline so that no TDS is deducted.
However, if interest on FD is still deducted, you can claim it easily by filing the ITR.

3. FD accounts of senior citizens

Senior citizens do not have to worry about TDS deductions as they are exempt from these deductions up to Rs. 50,000 on interest income in a year. If the interest earned is over this limit but your overall income is lower than the exemption baseline, Form 15H can be submitted to the financial institution. This would contain a declaration that your income is not taxable. Again, a refund can be claimed through ITR filing if TDS is still deducted.

Also read: How to Check EPFO Claim Status

When the TDS return is accepted, applicants can check the status by clicking on the token number. Afterward, they can download the provisional receipt for their records.

The provisional receipt, whether accepted or rejected, is generally displayed in the following format:

Taxpayers have the option to request a reissue of their TDS refund. Before initiating this process, it's essential to verify the accuracy of ITR details and check the current TDS refund status.

To apply for a TDS refund reissue, follow these steps:

1. Visit the official Income Tax Department portal.
2. Log in to your e-filing account using your PAN and password.
3. Navigate to the 'My Account' section.
4. From the drop-down menu, select 'Service Request.'
5. Under 'Request Type,' choose 'New Request.'
6. In the 'Request Category' section, select 'Refund Reissue.'
7. Click the 'Submit' button.
8. Enter details such as account number, IFSC code, and account type.
9. Authenticate the request using Aadhaar OTP and EVC code.
10. Finally, click 'Submit' to complete the process.

Once submitted, any updates will be reflected in the centralized TIN database, and the TDS refund will be adjusted and reissued based on the revised information. It is important to check your TDS refund status before proceeding with this process.

When you file your ITR, the TDS is not instantly refunded to your bank account. The refund takes a while to be credited. Typically, it can take around 3-6 months for you to receive your TDS refund. This is assuming that you file and verify your ITR before the due date. These are the two factors based on which your TDS refund period may vary.

If you do not receive your TDS refund after this period, you must contact your employer to verify Form 26AS and Form 16 and then raise a complaint with the IT office.

If you do not receive your TDS refund within the stipulated period, you will receive an interest of 6% per year on the TDS refund’s total value. This provision is stated in Section 244A of ITA.

To track your TDS refund status, follow these simple steps:

1. Visit the Income Tax Portal:
   Log in to the official e-filing portal using your credentials.

2. Navigate to the TDS Section:
   Once logged in, locate and click on the 'TDS' option, then select 'View Filed Status.'

3. Fill in the required information:
   Select the necessary details from the drop-down menus and provide essential information.

4. View refund status:
   After submitting the details, click on 'View Details' to access the TDS return status.

5. Check TDS refund status:

   • The status of your TDS return will be displayed on the screen.

   • If the file is uploaded and processed, the status will change to 'Updated.'

   • The uploaded file will be validated, and the final status will be shared.

The system typically processes and updates the status within 24 hours. The TDS refund process shown will indicate if you are eligible for a refund. To check your status, you will need to provide your PAN and the relevant Assessment Year.

Also Read: Form 61A

Even after the verification process is complete, TDS refunds can sometimes be delayed due to the following reasons:

• Pending tax return processing: Your Income Tax Return may still be under review.

• Tax notices: You may have received a notice from the tax authorities, either a Defective Notice or a Proposed Adjustment Notice.

• No refund due: The tax authorities may have determined that no refund is owed.

• Outstanding tax liability: The tax authorities may have identified an outstanding tax amount.

• Incorrect bank details: Incorrect or outdated bank account information can hinder the refund process.

If your refund status shows as "Rejected," you can find more information by clicking on the "Token Number." Additionally, you should inquire about the procedures for lodging a complaint regarding the delay in receiving your refund.

Also read: What is Form 10E

If you experience delays in receiving your TDS refund, you can file a complaint to expedite the process. To ensure a smooth resolution, you will need to provide specific documents. For further assistance, you may contact the Income Tax Ombudsman, submitting the following details:

• PAN
• Form 16
• TDS certificate issued by your bank or financial institution
• Bank statement
• Documents outlining all investments and income for the relevant financial year.

Also Read: Penalty for Late Filing of TDS Returns

Let us now share an overview of the different possible statuses of your income tax refunds and what you can do in each situation:

Also Read: Tax Real Rate of Return

Follow these best practices to help ensure quicker processing of your TDS refund:

• Match your TDS records: Verify that the details in Form 26AS, AIS, and TIS match your income and TDS certificates before filing your ITR.
• Choose the correct ITR form: Select the appropriate Income Tax Return form based on your income sources and eligibility.
• Claim eligible deductions only: Report only those deductions that you are entitled to and keep supporting documents ready for verification.
• Validate your bank account: Ensure the bank account selected for the refund is active, pre-validated, and linked with your PAN.
• E-verify your ITR promptly: Complete the e-verification process immediately after filing to avoid delays in refund processing.
• Report accurate information: Enter the exact TDS amounts and income details instead of relying on estimates to minimise errors and processing delays.

Understanding TDS and knowing how to claim a TDS refund is important for taxpayers whose deducted tax exceeds their actual liability. This situation often arises due to over-deduction on salary or interest income.

To claim a refund, you need to file your Income Tax Return (ITR) accurately and provide valid bank details to receive the refund via direct transfer. Timely filing is crucial, as the refund process usually takes around 3 to 6 months.

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