TDS or Tax Deducted at Source is the tax that is deducted by an employer. TDS is deducted every month by the employer. TDS is deducted based on the financial transactions made by the employees throughout the financial year.
Benefits of TDS
- It regulates the collection of taxes
- It ensures a regular income stream to the government
- TDS lightens the burden of one-time tax payment
- Provides the assessee with convenient modes of tax payment
- It expands the tax liability in the system
What is a TDS Refund?
When there's a discrepancy between the tax projected by you and the actual tax that you are supposed to pay at the end of the year.
Rajiv works at a Multi-National Company in Bangalore. After filing the income tax, he realized that he was eligible for tax deduction under Section 80C. He had paid an additional 10,000 Rupees.
So, the TDS Refund that Rajiv is eligible for amounts to 10,000 rupees.
What is Income Tax Refund/TDS Refund
The case for Income Tax Refund arises when the tax paid by an individual is larger than the amount of taxes that are supposed to be paid by him/her legally. The sections 237 to 245 under the Income Tax Act have a section on this concept.
Who is eligible for Income Tax Refund?
- If you have paid the tax in advance and the tax paid through self-assessment is greater than the tax paid through the regular assessment, then the taxpayer will be eligible for an income tax refund
- If the TDS from your salary is higher than the tax payable after regular assessment of income tax
- If there is an error in the regular assessment
- If the same income is taxed in India as well as a foreign country, the taxpayer can file for tax refund since this leads to double taxation
- If after deductions, the tax paid amount is shown to be negative
- If the investments that you have made show any form of tax deductions
How to get a Tax Refund in India
Tax-refund can be availed while filing your Income Tax Returns. The date of filing Income Tax is generally on the 31st of July
How to avoid the hassle of tax filing
Remember these points to avoid the hassle of tax filing
- Plan the IT returns that you're required to file at the beginning of the financial year to avoid paying late tax payment charges
- If you manage the tax paid by you smartly, you can avoid delays and refund hassles
- Learn about all the tax exemptions that you are eligible for and make sure that you claim tax exemptions so that you don't pay any additional taxes