The other day I was on a walk with a friend (Priyanka) in her 40s. The topic for that day was her income and taxes applicable. She is a very hard-working girl with a fixed salary income, some consultant fees out of her side hustle on weekends as a freelancer, rental income from a house purchased out of her surplus funds, and Dividend Income from her Equity Investments in stock markets.
While walking she came up with a few questions about TDS and ITR filing.
She went on to explain that TDS was deducted from my various incomes and I only received a net amount. The tax was already deducted from her salary income, as it is mandatory to deduct TDS from her salary and the employer had estimated her total Salary and started deducting TDS right from the first month of the year based on tax slabs applicable to her and paid her net salary after deducting tax applicable in her case.
If TDS is already deducted from my salary, then why ITR filing?
I went ahead to explain to her that TDS is just a partial tax, where some portion of your income is deducted at the time of making the payment to you while Income Tax is the final amount, that you pay while filing your income tax return, which is a complete tax on all your incomes taken together. Hence filing of income tax return every year gives a clear picture of your total income earned and total tax paid.
Doesn’t TDS deduction lead to double taxation?
No, not at all was my answer to her. Just like you eat small portions of meals at regular intervals and finally eat a complete meal to satisfy your balance hunger. Similarly, tax is deducted in small portions, and final tax liability is paid either as Advance Tax or paid at the time of filing an Income Tax Return.
In Fact TDS is reduced from the total tax liability to arrive at balance tax payable, if any.
Total Tax liability as per the new tax regime comes to Rs.1,95,000 in the following example,
| Incomes | TDS Deducted | Total Tax Liability | Balance Tax Payable |
| Salary Income=10Lacs | Rs.60,000(Tax Slab) | ||
| Freelance Fee= 2Lacs | Rs.20,000(10%) | ||
| Rental Income= 3Lacs | Rs.15,000(5%) | ||
| Dividend Income= 1.5Lacs | Rs.15,000(10%) | ||
| Total Income= 16.5Lacs | Total TDS= Rs.1,10,000/- | Rs.1,95,000/- | Rs.85,000/- |
| Incomes | Tax Slab Rate | Total Tax Liability | Tax On Salary of Rs.10Lacs |
| Upto 3Lacs | NIL | NIL | NIL |
| 3 to 6Lacs | 5% | 15000 | 15000 |
| 6 to 9Lacs | 10% | 30000 | 30000 |
| 9 to 12Lacs | 15% | 45000 | 15000 |
| 12 to 15Lacs | 20% | 60000 | – |
| Above 15Lacs | 30% | 45000 | – |
| Rs.1,95,000/- | Rs.60,000/- |
Please correct me if I am wrong! Said Priyanka
Does that mean TDS only Reduces my income at the time of receipt and it is nothing but Collected from the payments made to me, which I should claim against actual tax liability?
Yes! That’s right my friend
What is the need to deduct TDS, if anyways I will have to pay the tax at the time of filing my tax return?
If you see from the tax authorities point of view then TDS is mainly to reduce tax evasion and better tax compliance at the time of payment itself. And also beneficial for you to avoid paying full tax together and to avoid penalties and interest on delayed payments.
This looks like a smart move!
Does this TDS amount change during the year?
Not really if your Salary Income is fixed and you have submitted all your income details and investment proof much in advance and your Tax is estimated correctly.
But the TDS amount may change if you have worked very hard during the year and are eligible for some bonus, as TDS will apply to that bonus amount as well.
What if you have missed submitting your investment proof in the first month itself, the TDS amount will also change.
If you submit Rental Income towards the end of the year, it will amount to almost your entire salary for the last month will be deducted as TDS.
My advice to you, Priyanka, is to better plan your investments much in advance to avoid last minute rush.
There is a huge discussion about refunds.
How can I be eligible for a Refund of TDS on salary?
If you have forgotten to submit any Investment proofs or Interest on Housing loan to your employer, which reduces your tax liability, then you can claim such investments as your deduction against your income while filing your income tax return. Such deduction will reduce your tax liability and hence you will be eligible for a tax refund.
How to get TDS refund on salary
How much refund can I claim? Asked Priyanka
For this, let me first take you through the procedure of TDS filing
Once TDS is deducted by the employer, your client, respective tenant, or the company where you have invested your funds, they will deposit that TDS with the Central Government, file their TDS return, and give your PAN a credit for the TDS deducted by them, which will get reflected in your 26AS. You can cross-verify TDS in your Form 16 or TDS certificate with 26AS, TIS, and AIS.
Sometimes TDS may be deducted by the employer/payer but credit is not available in your 26AS, better to get it resolved with your employer or client else you will surely receive a notice for the excess TDS claimed.
Example; Your Employer deducted Rs.50,000 TDS from your Income, but only paid and filed a TDS return for Rs.20,000/-. You can only claim Rs.20,000 TDS against your total tax liability, If you claim the full Rs.50,000 against your tax payable, then the Income Tax department will come knocking at your doors.
While filing your income tax return, the TDS reflected in your 26AS will automatically get adjusted against your final tax liability. If your TDS is more than Total Tax Liability, then you can claim a refund for such excess amount deducted.
Should I be aware of some facts so that I get a Refund on time?
Keep the last day to file income tax return in mind. The due date to file your Income Tax Return is 31st July of the year immediately following the year in which you have earned the income. However, I would recommend filing your income tax return as early as possible to claim a refund.
Why so?
Usually, it takes not more than 3 to 6 months for the refund to hit your bank account provided e-verification is done on time. But I have recently seen people getting refunds in less than a month. Thanks to the great efficiency and technology used by the department. If your tax credits match and you have provided your bank details correctly, then you should be receiving your refund quickly.
That’s why always file your ITR if TDS is deducted.
What are the Steps for claiming a refund?
Whether you have to file a salary income tax return or file income tax return with form 16 online, the procedure remains the same for all.
Compute Total Income, Calculate Total Tax Liability, and Reduce TDS, if TDS is more than the Final Tax, then you can claim a Refund.
Is TDS refund process the same for any income that I earn?
No, Priyanka
TDS for self-employed and your retainer’s business is 10%. Since it’s a business income, you can either go for presumptive tax benefit and file tax returns accordingly or prepare complete final accounts and claim all your business expenses against your income and arrive at Business profits accordingly.
Tell me why do we file ITR, is it mandatory?
Income Tax Act states that if total income before deductions exceeds the basic exemption limit. Then IT return is required to be filed compulsorily irrespective of whether your employer deduced TDS or not, file ITR if exceeds the basic exemption limit.
What if my income doesn’t exceed the Basic Exemption limit, do I still have to file an Income Tax Return?
See Priyanka, there are a few cases where it is mandatory to file ITR such as,
If your TDS is more than 25000 and for senior citizens if your TDS is more than 50000
The savings deposit is more than 50Lacs
Deposit in current a/c is more than 1cr
Foreign travel is more than 2Lacs
Electricity is more than 1Lac
Sales is more than 60Lacs
Gross receipts in the profession is more than 10Lacs
If you fall in any of the above categories, and you miss filing your ITR, then you will get a notice from the Assessing officer.
I got it, said Priyanka
What is the benefit of Income Tax Return File?
If I don’t fall in any of the above categories and my income is also below the basic exemption limit, what if I still go ahead and complete the ITR filing, Will I get some Benefits?
Yes, Why not?
ITR is considered to be a basic document for applying for a bank loan, a visa for travel abroad, to claim a refund of tax, and for selling products to the Government.
Also, expect to get additional Interest along with a Refund amount from the Income Tax Department.
Conclusion
File ITR even if TDS is already deducted in order to claim a refund.
I provide online Income Tax Filing Services, When you get your Form 16 or TDS certificate and want to file your tax returns, connect with me
Keeping following my blog for regular updates on Income Tax Return Filings.
FAQ’s
Do you have to pay income tax if TDS is deducted?
Yes, After computing your Total Tax Liability on your Total Income, if Total Tax liability is more than TDS already deducted, then you have to pay additional income tax.
Is TDS and income tax same?
No, TDS is Tax Deducted at the time you receive your payment. While Income Tax is computed on total income, from which TDS amount is deducted to arrive at either additional tax payable if TDS is less than Income Tax payable or a refund due if TDS is more than Income Tax.
Can I get TDS refund?
Yes, If your TDS is more than Income Tax payable, then you can get a TDS refund at the time of filing your income tax return.
Is TDS deduction good or bad?
TDS deduction is mandatory in some cases. It is good to reduce tax evasion and better tax compliance and also to avoid penalty later.