TDS Refunds - Detailed procedure for the deductor

Latest Update on TDS refunds for AtmaNirbhar Bharat

On the request of the Government of India:

  • RBI issued all the pending income-tax refunds up to Rs 5 lakh, immediately benefiting around 14 lakh taxpayers
  • Implemented “Special Refund and Drawback Disposal Drive” for all pending refund and drawback claims

Hello, in this blog we will see a brief introduction on the TDS refunds under the Income Tax Act.

We will cover the following topics in this post:

Introduction

Collection of TDS is managed by the Central Board for Direct Taxes (CBDT) as per the IT Act, 1961. When the taxpayer pays tax under TDS is greater than the actual tax payable in the FY he/she is eligible for a TDS refund. The calculation TDS refund happens after consolidating taxpayer’s income from various sources.

In simple terms, when you file your ITR, sum up all your income from various sources. Then find out the tax liability, and subtract the TDS applied to your income. If TDS is higher than the total tax liability in an FY, then you get a TDS refund.

Section 200A is about the processing of TDS return. It also discuss the process to refund the amount if the deductor pays more amount than he is liable to deduct.

CBDT has issued the Circular No. 2/2011 dated 27-4-2011 in supersession of the older Circular No. 285. In this circular, it was mentioned that the provision of section 200A will be applicable for issue of refund w.e.f. 1-4-2010 and older circular will be applicable to the claim of refunds for the period up to 31-3-2010. Further, it was also described that this circular will not be applicable to TDS on non-residents falling under sections 192, 194E and 195 which are covered by Circular No. 7/2007 dated 23.10.2007 issued by the Board.

 Procedure for TDS refund

The procedure of TDS refund can be described under the following three categories:

  • Payment made to non-residents falling u/s 192, 194E and 195
  • Tax deducted by the deductor for the period up to March 31, 2010
  • Tax deducted by the deductor for the period after March 31, 2010

TDS Refund on payment to non-residents falling u/s 192, 194E and 195

This includes circumstances were after depositing the TDS into government account by the deductor,

  1. the contract was cancelled and no remittance is made to the non-resident;
  2. the remittance is duly made to the non-resident, but the contract is cancelled. In such cases, the remitted amount has been returned to the person responsible for deducting tax at source;
  3. the contract is cancelled after the partial execution and no remittance is made to the non-resident for the non-executed part;
  4. the contract is cancelled after the partial execution and remittance related to non-executed part is made to the non-resident. In such cases, the remitted amount has been returned to the person responsible for deducting the tax at source. Also, no remittance is made but the tax was deducted and deposited when the amount was credited to the account of the non-resident;
  5. There occurs exemption of the remitted amount from tax either by an amendment in law or by notification under the provisions of Income-tax Act, 1961;
  6. An order is passed under section 154 or 248 or 264 of the Income-tax Act, 1961 reducing the tax deduction liability of a deductor under section 195;
  7. Deduction of tax occurs twice from the same income by mistake;
  8. There occurs payment of tax on account of grossing up which was not required under the provisions of the Income-tax Act, 1961;
  9. There occurs payment of tax at a higher rate under the domestic law while a lower rate is prescribed in the relevant double taxation avoidance treaty entered into by India.

In the type of cases referred to in point no.1, the non-resident not having received any payment would not apply for a refund.

For cases covered by from point no.2 to 9  no claim may be made by the non-resident where he has no further dealings with the resident deductor of tax or the tax is to be borne by the resident deductor.

This resident deductor is, therefore, put to genuine hardship as he would not be able to recover the amount deducted and deposited as the tax.

TDS Refund can be issued in these cases under the following guidelines:

  1. This amount can be refunded, with prior approval of the Chief Commissioner of Income-tax or the Director-General of Income-tax concerned, to the person who deducted it from the payment to the non-resident, under section 195.
  2. Refund to the person making payment under section 195 is being allowed as income does not accrue to the non-resident or if the income is accruing no tax is due or tax is due at a lesser rate. The amount paid into the Government account in such cases to that extent is no longer ‘tax’. Because of this, no interest under section 244A is admissible.
  3. A refund in terms of this circular should be granted only after obtaining an undertaking that no certificate under section 203 of the Income-tax Act has been issued to the non-resident.
  4. The limitation for claiming TDS refund under this circular shall be two years from the end of the financial year in which tax is deducted at source.
  5. It needs to be ensured by the Assessing Officer that they disallow corresponding transaction amount, if claimed, as an expense in the case of the person, being the deductor making the refund claim. Besides, in all cases, the Assessing Officer should also ensure that in the case of a deductor claiming a refund, the corresponding disallowance of expense amount representing TDS refund is made.

TDS Refund on Tax deducted by the deductor for the period up to March 31, 2010

All the cases for the period up to March 31, 2010, except those which are related to a non-resident will come under this clause. The excess payment to be refunded would be the difference between:

  • the actual payment made by the deductor to the credit of the Central Government; and
  • the tax-deductible at source

TDS Refund can be issued in these cases under the following guidelines:

  1. If the refund of the same FY, the credit of the excess payment can be adjusted in the quarterly statement of TDS. The Adjustment will be done in the next quarter during the financial year. In the case where the detection of such excess amount is made beyond the FY concerned, such claim can be made to the Assessing Officer (TDS) concerned. However, no claim of refund can be made after two years from the end of the financial year in which tax was deductible at source.
  2. Prior administrative approval of the Additional Commissioner or the Commissioner (TDS) concerned has to be obtained. This shall depend upon the quantum of refund claimed more than Rs. 1 Lakh and Rs. 10 Lakh respectively.
  3. After meeting any existing tax liability of the deductor, the balance amount may be refunded to the deductor.

TDS Refund on Tax deducted by the deductor for the period after March 31, 2010

Section 200A is inserted by the Finance Act (No. 2), 2009, where it has specified the procedure to process the eTDS return filed by the Tax deductor. This procedure includes:

  • The sums deductible as TDS should be computed after making the following adjustments:
    1. any arithmetical error in the statement; or
    2. an incorrect claim, apparent from any information in the statement;
  • The interest calculation, if any, will be based on the sums deductible as computed in the statement;

The refund will be provided to the deductor in cases where he has paid the amount more than the amount for which he is liable to pay after adjustment of interest on any outstanding u/s 200 and u/s 201 and any amount paid otherwise by way of tax and interest.

However, no communication under this subsection will be sent after the expiry of one year from the end of the financial year in which the statement is filed.

How to claim TDS refund?

If the employer deducts more than the tax payable:

  • If the deducted tax does not match the actual tax payable, then calculate your income and taxes, file an ITR and claim a refund.
  • Your need to provide your bank name and IFSC code while filing ITR. So, the department can transfer the refund with ease.
  • If you don’t have a taxable income, then apply for a lower /NIL TDS certificate from the jurisdictional Income Tax Officer in Form 13 as per Section 197. You can submit this to the TDS deductor.

TDS refund on Fixed Deposit:

  • Submit Form 15G before the end of FY to your bank to notify that you don’t have a taxable income. Therefore, no TDS deduction should be done on the interest income.
  • If the bank does deduct tax on your interest income even after submitting the Form 15G, you can claim a refund by filing your ITR.

Senior citizens with FD accounts:

  • If 60 or above, there will be no tax deductions on FD interest up to Rs. 50,000 annually.
  • If you have no taxable income for an FY(after claiming the deduction of up to Rs. 50,000), notify it to your bank by submitting Form 15H.
  • If the bank deducts tax on your interest income then you can claim a refund by filing your ITR.

How to claim TDS Refund Online?

To file TDS online, you need to register on the IT department’s website: https://incometaxindiaefiling.gov.in/

After registration, download the relevant ITR Form. Fill the required details, upload the Form and ‘submit’.

It generates an acknowledgement that needs to be e-verified. You can do the E-verification using a digital signature/Aadhaar-based OTP /net banking account.

If you cannot complete the e-verification, then send a signed physical copy to the IT department.

How to check TDS refund status?

You can check the status of your TDS refund using:

  • Acknowledgement and email from the IT Department.
  • Using the PAN, check the refund status on the IT website.
  • Calling CPC Bangalore.

For more reference refer here – https://tin.tin.nsdl.com/oltas/refund-status-pan.html

Interest on TDS Refund

If the TDS refund payment is late then it comes with a simple interest of 6% as per the Section 244A of the IT Act. This interest is calculated from the 1st month of AY when an ITR is filed with the due date. In some cases, it is from the date of filing of the returns.

If the TDS refund is less than 10% of the income tax payable, then the Department needn’t pay this interest. If you receive any interest then it is taxed under ‘income from other sources’.

With that, we have come to the end of this post. Share your queries with us in the comment section below.