Every person (except certain individual and HUF who are not required to obtain tax audit report) who is making payment in the nature of commission, salary, professional fees, royalty, interest, rent, etc. is required to deduct tax at prescribed rates. This is known as Tax Deducted at Source (TDS). Therefore, it is in the interest of the recipient of income to make sure that there isn’t any excess deduction of tax by the payer. There are some options which, if exercised timely and diligently, can help someone avoid excess deduction of tax at source.
Interest Income: For example, if the income is in the nature of interest (e.g. interest on bank deposits or loans) and the estimated total income including such interest income is likely to be less than the basic exemption limit (e.g. INR 5,00,000 for super senior citizen i.e. 80 years and above), the deductee (i.e. person who receives income) can make an application in Form 15G or Form 15H to the payer of interest.
Salary Income: If the income is in the nature of salary, the employee can submit (a) details of rent paid (e.g. name, address & PAN of the landlord, amount of rent) in order to claim HRA benefit, (b) details of investment proof (e.g. LIC receipt, PPF contribution, principal repayment of housing loan, etc.) to claim deduction under section 80C, (c) Copy of amount deposited under National Pension Scheme to claim deduction under section 80CCD, (d) mediclaim premium receipt for deduction under section 80D, (e) details/certificate of interest paid on housing loan to claim set off of loss from house property, and (f) donation receipt if donation is made to certain approved fund to claim deduction under section 80G.
Other Payments: In respect of other payments (e.g. commission, rent, etc.), if the recipient of income believes that his/her total estimated income for the relevant financial year will be less than the basic exemption limit or if the TDS deducted at applicable rate will result into large refund, he can make an application in Form 13 to the Income Tax Officer for issuance of NIL or lower rate deduction certificate. The Tax officer on satisfying with the estimated tax liability will authorise the payer of income either not to deduct tax at source or deduct at a rate lower than the rate prescribed under the relevant provision of the Income Tax Act. On receiving such certificate, the deductee shall furnish the same to the deductor to deduct TDS in accordance with the direction given by the Income Tax Officer.
One important care to be taken by the recipient of income is to supply his/her PAN to the deductor because in the absence of PAN, the deductor may deduct TDS at the higher of rates prescribed in the Act or rates in force or 20% under the provision of section 206AA of the Act.
How to check if TDS is being deposited with Govt correctly
The recipient of income is always concerned about what will happen if the tax deducted from the payment is not deposited by the deductor with the government. In order to check whether the tax deducted has been correctly deposited with the government, the recipient can periodically login with the Income Tax Department’s e-filling website to check the TDS credit under his//her PAN by viewing Form 26AS. Form 26AS gets updated on regular basis as and when the deductor file his/her quarterly TDS return.
The deductee, on finding any mistake (e.g. TDS amount of a particular deductor is not appearing or wrong amount reflected), should approach the deductor to resolve the mistake. Now-a-days the government has also started a new initiative to intimate salaried employees via SMS every quarter with respect to TDS deposit by their employers.
Considering the above, it is recommended that the recipient of income need to remain cautious in exploring various options available to prevent excess deduction of tax and should regularly keep checking his/her Form 26AS to avoid any mistake in getting credit of TDS.