How Claim TDS Refund

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  • 06 Feb 2023

If your annual income is above Rs 2.5 lakh, a part of it goes towards income tax (IT). You can claim this portion of amount as TDS refund. The amount of tax you need to pay will also depend on how much you earn.

Suppose you are a salaried employee. You can pay your taxes in the following ways:

  • You can file your taxes for the previous financial year in a single instalment. You can then pay the taxes due in the next year.
  • You can pay your taxes before the end of a financial year. This is known as advance tax.
  • You can pay your taxes throughout the year in the form of tax deducted at source (TDS).

If you choose options (1) or (2), you may be eligible to make an TDS refund claim. Moreover, you can only claim TDS refund if excess TDS has been deducted from your income.

Read more: What is TDS?

Is your tax liability lower than the tax deducted from you? Then, you can claim an IT refund. However, most taxpayers are unaware of how to go about this process. So, they end up losing a part of their hard-earned money. Yet, the process of claiming your IT refund is quick and simple. The following section explains what you need to do.

You can claim your IT refund when you file your income tax returns (ITR) for the current financial year. The last date for filing your ITR is 31 July of the year following the current financial year.

However, owing to difficulties resulting from the COVID-19 pandemic and the consequent lockdowns, the government has introduced deadline extensions for filing ITR.

  • The revised due date to file ITR for FY 2019–20 is 30 November 2020.
  • For those filing belated returns for FY 2018–19, the new deadline has been shifted to 30 September 2020. The original deadline was 31 March 2020.

Read more: Right time to start tax planning

You can file your ITR by entering the relevant details in an online form on the income tax website of the Government of India However, you can avail this online facility only for ITR1 and ITR4.

You need the following documents to file your ITR:

  • PAN card
  • Form 16
  • TDS certificate
  • Interest statements
  • Details of investments

Once you have completed the online ITR form, click on the validate button. The system will calculate your refund amount that is due. This will be on the basis of the information you have entered. The refund row of the form will display the amount due to you.

Please bear in mind that the IT Department has to approve this displayed refund amount before you receive your payment. The department will first process your ITR. Then, they will decide on the amount to be refunded to you. This amount may or may not match the refund amount you have calculated.

Read more: Benefits of filing income tax refunds

If your entered IT details are accurate, you will get an intimation order under Section 143. This will be in the form of any of the following messages:

  • Your tax calculation matches the department’s calculation and your entire claim is accepted.
  • Your tax calculation matches the department’s calculation and there is no tax liability.
  • Your tax calculation does not match the department’s calculation and there is an additional tax liability. This could be demand payable by you. It could also mean that your refund claim is partly accepted (reduced amount) or rejected. In case of any discrepancy, the IT Department may request additional documentation. Then, you will get a different message.

You can also verify your refund status at any time through the following methods:

  • By checking the refund reference number in the ITR acknowledgement email sent to your registered email address.
  • By entering your PAN card number on the IT website.
  • By calling CPC Bangalore on 1800-4250-0025 (toll-free for requests across India).

You may have an issue with the amount refunded as compared to the amount you claimed. There could even be a delay in receiving your refund.

To resolve such problems, you can get in touch with your IT officer to file a complaint. You will have to write a letter clearly describing the issue. You will also need to provide all necessary documents for revaluation.

If you still do not get a satisfactory response, you may contact the IT ombudsman. You will have to again submit all the documents alongside your ITR.

TDS Refund

Please note that you are entitled to receive interest on your TDS refund under Section 200A of the Income Tax Act.

Suppose there is a delay in paying out your tax refund. Then, you will receive a simple interest of 6% per annum on your refund amount.

What happens if your tax refund is less than 10% of the tax payable in a year? In such cases, no interest will be paid out.

Note: Interest on a tax refund is not taxable.

Read more: Tax fundamentals

It is possible to save taxes without going through the process of refunding. You can decrease your tax outgo by investing in tax-saving options. If you make investments under Section 80C of the Income Tax Act, you can get tax benefits by lowering your taxable income

Tax-saving investment options include:

  • Equity-linked Savings Scheme (ELSS)
  • Public Provident Fund (PPF)
  • Tax-saving fixed deposits (FDs)
  • National Pension Scheme (NPS)

By investing in any of the above schemes, you can get a maximum tax benefit of Rs 1.5 lakh per annum.

Read more: Investments to declare to get tax exemption

Here are some ways in which the mentioned tax-saving investments vary from each other:

  • Shortest lock-in periods:
  • ELSS: usually 3 years
  • Tax-saving FDs: usually 5 years
  • Long lock-in periods:
  • PPF: 15 years
  • NPS: till the applicant turns 60 years
  • Best rate of returns:
  • ELSS (although it is subject to market fluctuations)
  • PPF Note: Returns on various tax-saving schemes are taxed differently.

Before choosing one tax-saving device over another, consider your:

  • Risk appetite
  • Financial goals
  • Contingency needs
  • Lifestyle

You could take the help of a tax consultant before making your decision.

Summing Up

Claiming your tax refund has become quite easy. You need to follow the due process, and submit your ITR and necessary documents. Based on these, the Income Tax Department will address your claim.

Read more: Tax-saving investment options

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