Tax Deduction at Source (TDS) is one of the primary reasons your in-hand salary might be less than your Cost to Company (CTC). According to Section 192 of the Income Tax Act of 1961, employers must deduct TDS from an employee’s salary before transferring it to their bank account.
You’re not alone if you’re wondering how to claim a tax refund after your employer has deducted TDS. Thousands search for insights on getting a TDS refund and streamlining the process. Angel One has crafted this extensive guide to address all your concerns.
What is TDS Refund?
TDS, or Tax Deduction at Source, represents the amount employers preemptively deduct from employees’ salaries as a form of advance tax payment. However, the amount deducted sometimes might surpass an individual’s actual tax liability. When this happens, knowing how to claim tax refunds is essential to ensure you get back the arrears.
How is TDS on Salary Calculated?
- Determination of Gross Salary: The employer first determines the estimated salary for the financial year. It includes basic pay, allowances, perquisites, EPF contributions, bonuses, and more.
- Exemptions Calculation: The employer then considers exemptions under Section 10, such as HRA, travel expenses, and other relevant allowances.
- Net Monthly Income: The gross salary minus exemptions gives the net monthly income.
- Inclusion of Other Income: If an employee has other sources of income, they are added to the net taxable salary.
- Deductions: The employer considers investments and expenditures the employee declares and reduces them from the gross total income.
With the new tax regime introduced in FY 2023-24, taxpayers can opt between the old and new tax regimes. The selected regime will dictate the method and amount of tax deductions.
Check our TDS Calculator
How to Claim TDS Refund?
Understanding how to claim income tax refund efficiently is vital to maximise your returns and ensure you’re not leaving money on the table.
Step 1: Acquire Form 16 from your Employer
This document is a certificate from your employer that details the TDS amount deducted throughout the financial year.
Step 2: Understand Form 16
Form 16 comprises two parts:
- Part A: Contains crucial details like your employer’s TAN, PAN, and the total TDS deducted.
- Part B: Offers a comprehensive salary breakdown, including deductions and exemptions.
Step 3: Choose the Correct ITR Form
You must pick the appropriate Income Tax Return (ITR) form depending on your income type and sources. For salaried individuals, ITR-1 is commonly used.
Read More about the Types of ITR Form
Step 4: File your ITR
While filling out your ITR, ensure you report all your income sources. Once done, the system will calculate the tax payable. If the TDS deducted by your employer surpasses this amount, you’re eligible for a refund.
How to Get TDS Refund Online?
Step 1: Register on the e-Filing Portal
Firstly, visit the official Income Tax e-Filing website. If you haven’t registered, do so using your Permanent Account Number (PAN).
Step 2: File your ITR
Log in using your credentials. Navigate to the ‘e-File’ section and select the appropriate assessment year.
Know more about e-Filing ITR
Step 3: Complete the Details
Utilise Form 16 to fill in details such as salary income, TDS amount, and other income sources, if any.
Step 4: Confirm and Submit
After entering all information, the online system will compute your tax liability. If the TDS amount deducted exceeds this, a refund due will be displayed. Verify and confirm all the details, then submit.
How to Check TDS Refund Status?
Post submission, it’s natural to be eager about your refund status. Fortunately, tracking it is straightforward:
Visit the e-Filing Website: Use your credentials to log in.
Navigate to ‘My Account’: Select ‘Refund/Demand Status’ from the dropdown. It will provide a real-time update on your refund status.
What is the TDS Refund Period?
Usually, after verifying your ITR, the Income Tax Department processes refunds within a few weeks. However, depending on the volume of requests they’re managing, it can sometimes take up to a few months.
Verifying the Status of TDS Refund
It’s essential to verify your ITR after submission. You can opt for an online Aadhaar-based OTP verification or send a physically signed ITR-V (acknowledgement) to the Centralised Processing Centre in Bangalore.
Interest on TDS Refund
If your TDS refund is delayed beyond the stipulated period, you may be eligible for interest, typically at 6% p.a., calculated from the first month after your tax is due.
Types of Income Tax Refund Status
Once you begin tracking, you’ll encounter various statuses like:
- Refund Determined: Indicates a refund will be processed.
- Refund Dispatched: The refund has been sent to your bank.
- Refund Failed: There was an issue; you might need to recheck bank details.
Consider Relief under Section 89
If you’ve received arrears or advance salary, you may be eligible for relief under Section 89. This relief ensures you do not enter a higher tax bracket due to a spike in your income. Fill out Form 10E on the official Income Tax portal to avail of this relief.
Important Points To Remember
- Employees with two or more jobs can declare their salaries and TDS details to one employer using Form 12B. It ensures correct calculation and deduction of TDS.
- Section 89 offers deductions that one can claim to reduce taxable income.
- Employers should provide TDS details in Form 16 and may also give Form 12BA for specific prerequisite details.
- The TDS deposited has a specific time limit. For government employers, it’s on the same day; for others, it depends on when the deduction happened.
- Every employer needs to file a TDS return using Form 24Q quarterly.
- Lastly, employers have a responsibility to provide TDS certificates to their employees.
Accurate knowledge of how to claim TDS is crucial for salaried individuals to ensure they aren’t overpaying their taxes.
How do I know if I'm eligible for a TDS refund?
Eligibility for a TDS refund arises when your employer deducts more tax than you owe after your applicable deductions and exemptions. It means you’ve paid more tax than your annual financial activities require. If this is the case, you’re entitled to a TDS refund.
What documents are essential for claiming a TDS refund?
For claiming a TDS refund, it’s imperative to have Form 16, which your employer provides at the end of a fiscal year. Additionally, prepare a detailed summary that lists all your other income sources and any tax-saving investments or instruments you’ve availed of during the year.
Is there an interest paid on the TDS refund amount?
Absolutely. Suppose the Income Tax Department delays your TDS refund beyond a certain period. In that case, they compensate by paying an interest rate of 6% per annum on the refundable amount, ensuring you’re not at a loss due to the delay.
What should I do if there is a delay in receiving my TDS refund?
Firstly, review all the details submitted in your Income Tax Return (ITR) to ensure accuracy. If all details are correct and there’s still an unwarranted delay, it’s advisable to contact the Income Tax Department helpline.
Can the TDS refund be adjusted against other outstanding tax dues?
Yes, indeed. If you have any outstanding tax liabilities from previous years, the Income Tax Department has the provision to adjust your current TDS refund against those outstanding dues. It ensures the efficient settlement of all your tax-related dues.