Tax Deducted at Source (TDS) is the sum that is deducted from a taxpayer’s income like salary, interest from bank accounts, rent etc. If the TDS collected is more than what you owe to the government, you can get a TDS Refund. Let us explore this concept in detail.
A TDS Refund arises when the taxes paid by way of TDS are greater than the actual tax payable calculated for the Financial Year. It is calculated after consolidating income earned from various sources.
We all, as taxpayers, are categorized under various tax slabs. Say, you have an FD and earn an interest income out of it. Banks levy a basic 10% TDS on the interest accumulated. Now, if you belong to the 5% tax bracket, you can claim a TDS refund for the additional amount deducted.
Similarly, you can also claim a TDS refund of excess TDS deducted on salary due to non-submission of 80C investment proofs or rent receipts towards house rent allowance to the employer.
At the time of filing ITR, you would sum up all your income from various sources, find out the tax liability, and subtract the TDS deducted during the FY. If the TDS is higher than your total tax liability for the financial year, it means a refund is due from the government.
When the tax deducted does not match your actual tax payable, you can calculate your taxable income and taxes, file an income tax return (ITR) and claim a refund.
During the ITR filing process, you will be prompted to provide your bank name and IFSC code. This makes it easier for the IT department to refund you the excess tax paid.
1. When your employer deducts more than the income tax payable:
2. TDS deducted on fixed deposit:
3. For senior citizens with FD accounts:
There is no time limit fixed by the department to issue the refund. Based on historical data, if you have filed your ITR on time, it usually takes approximately 1 to 6 months for the refund to be credited to your bank account. The time it takes for the refund to be credited also depends on the completion of the e-verification. Nowadays, after the completion of ITR processing, a refund is issued within a month.
I. In case you haven’t received your refund, you can verify the status by log in to your e-filing account and follow the below steps:-
Step 1: Login to your e-filing account
Step 2: Go to E-file> Income Tax Returns > View Filed Returns.
Step 3: Now under the relevant assessment year for which you want to check the IT refund status, click on ‘view details’.
Step 4: If the ITR is processed with refund due, click on the ‘refund status’ link. The screen will show complete details of your ITR filing, i.e. from the date of ITR filed, ITR e-verification, ITR processed to the date of issuing a refund.
If the IT department is late in paying you the TDS refund as applicable, then they must pay you the amount with a interest of 0.5% for every month or part of the month (i.e.6% per annum). This provision comes under Section 244A of the Income Tax Act. This interest accrues from the first month of the Assessment year when an ITR is filed within the due date and from the date of filing of the returns in any other case.
Do note that no refund is payable if the refund is less than 10% of the tax payable; similarly, if the refund amount is less than Rs.100, there will be no refund. Moreover, the interest, if any, received is liable to be taxed under ‘income from other sources’.
Refund Status | Meaning | Action to be Taken |
Refund paid | The ITR filing is processed, and your account is credited with the refund | Verify the refund received with the bank |
No demand no refund | Not required to pay taxes or eligible for any refunds | When you have requested a refund, review the comparison you received from the IT Department and file a corrected return if necessary |
Refund unpaid | The IT department has accepted a refund, but it cannot be paid due to a bank or address details error | Raise a refund reissue request and update the appropriate information on the income tax portal |
Not Determined | Your ITR has not yet been processed | Recheck the status in a few days |
Refund determined and forwarded to the refund banker | IT Department accepted the refund request, and the refund banker has been notified | Wait for the refund to be credited to your account or contact the refund banker to find out the status of the refund payment |
Demand determined | There is an additional tax obligation that needs to be paid because the tax calculation differs from that of the IT department | Verify the calculation done under 143(1) to determine the mismatch/error. If an error is determined, it should be corrected by paying it to the IT department within the specified timespan. If there is no error, file a rectification and include all supporting information and documents to support the refund claim |
Rectification processed refund determined and sent out to refund banker | Correction return has been accepted, and in addition, the refund amount has been recalculated and sent to the bank for processing | Confirm refund receipt by checking your bank account |
Rectification processed and demand determined | The correction return has been accepted, but there are unpaid tax obligations (tax demands) that must be paid within a certain period of time | After cross-checking all the information within the designated time frame, pay the outstanding tax/tax demand |
Rectification processed, no demand and no refund | The IT department has acknowledged a corrected return and you are not liable for a tax refund or required to pay any additional tax | - |
Other TDS Articles:
1. What is Tax Deducted at Source
2. TDS Rate Chart
3. How to Make TDS Payment Online
4. TDS Calculator