Every salaried individual is liable to pay taxes every year based on the total income for that financial year. In addition to the income tax that you pay, an amount towards TDS or Tax Deducted at Source is deducted from your salary. In case the total taxes that you have paid for the financial year exceeds the actual Tax that you are liable to pay, you can claim a refund on the tax deducted from salary.
These claims can be made when filing the Income Tax Returns for the said financial year. Here is everything that you need to know about TDS and how you can get the money back.
TDS or Tax Deducted at Source is a certain amount that is deducted from your salary by the employer. In the beginning of every financial year, the tax projections have to be provided by the employee, based on which the TDS is deducted.
This Tax deducted from salary serves several purposes, as mentioned below:
It makes the collection of taxes more regulated.
You have the advantage of breaking down the taxes that you have to pay into monthly payments instead of paying it in one go.
This is an easier mode of payment for the tax-payer.
The reach of income tax collection is spread out better.
The government is guaranteed a regular income with the Tax being deducted automatically from the salary.
As mentioned before, you are required to provide the projection of investments to your employer. However, these projections may vary from the actual investments that you make at the end of the financial year. In case the total Tax deducted at the end of the financial year does not match the actual payable Tax, you have the option of claiming a TDS Refund.
You can get the money back from the Tax deducted from salary in the following cases:
If the TDS is deducted from your salary and the total Tax that you pay for the financial year is more than what is payable as per your income slab, you have an option of claiming a refund while filing the IT Return at the end of the financial year. In case you are certain that the TDS will exceed the Tax payable before the end of the financial year, section 197 gives you the provision of a lower or zero TDS. All you have to do is fill up Form 30 and submit it. You will receive a response certificated from the Income Tax Officer that you can submit to your employer or any other authority who may deduct TDS.
Whenever you file your IT Returns, make sure that you mention your bank’s account number and IFSC code. This allows the refund to be made to your account directly.
In addition to the salary, TDS can also be deducted from the interest that you get for your Fixed Deposit. If this amount increases the Tax payable beyond the amount due as per your income slab, you have the option of claiming a refund. You can claim a refund on this by declaring this deduction in your IT return. As per the guidelines, the IT department will compute the refund due to you and will credit it automatically to your bank account.
You also have the option of filling up Form 15G and submitting it to your bank. You can show them that the salary is much below the tax slab and as a result, the Tax shall not be levied on it.
For all senior citizen, there is an exemption on the TDS deducted from the fixed deposit interest received. For those who are above 60 years of age, it is a good idea to fill form 15H in advance. Submit this to your bank and you will automatically be exempted from paying the Tax on the FD.
If you have not filled form 15H, the second option is to declare the deduction in your IT Returns. The IT department will then calculate the total Tax payable by you and the excess Tax that is paid will be credited back to your bank account.
For all individuals, it is a good idea to declare the TDS on the interest received on FD on a yearly basis. When you declare this at the time of maturity of the FD, you will still receive a rebate. However, the Tax payable can increase considerably when the TDS on interest is declared as a lump-sum.
In addition to providing you with a refund on the TDS, the IT department also pays an interest on these refunds under certain conditions: You can get an interest on the refund amount if, the tax returns are filed before the given due date. The due date is the 31st of July for any refund claims. If you pay post the due date, the period for which the interest is calculated is reduced.
However, if the refund amount is less than 10% of the total Tax payable, then you will not receive any interest on this amount. It is also important to note that this interest paid on the refund amount is taxable. Therefore, when you are filing the IT returns for the financial year, it is important to mention the gross total income which also includes the interest paid on any refunds.
The interest due on the refund is calculated using the simple interest method. You get a refund at the rate of 0.5% per month or at the rate of 6% annually.
Although the above options are available to claim a refund on your TDS, the amount that you receive is dependent on the judgment of the Income Tax Commissioner. The claim may or may not be accepted. Therefore, it is a good idea to file it well before the due date in case of any issues including rejection of claim, wrong bank details mentioned in the claim or even missing documents.
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