TDS refund explained: Who can claim it, how to get it through ITR and check status

Tax Deducted at Source (TDS) is a mechanism through which tax is collected in advance. Under this system, the payer deducts a specified amount of tax before making payments such as salary, bank interest, rent, dividends or professional fees and deposits it with the government on behalf of the recipient.

However, there are situations where the total TDS deducted during a financial year exceeds the taxpayer's actual income tax liability. In such cases, the excess amount can be claimed back by filing an Income Tax Return (ITR).

Here's a look at who is eligible for a TDS refund and how taxpayers can claim it.

What is a TDS refund?

A TDS refund arises when the tax deducted during a financial year is higher than the final tax payable.

This can happen because of incorrect tax calculations, lower taxable income, additional deductions or because the taxpayer's income falls below the basic exemption limit. Once the ITR is processed, the Income Tax Department refunds the excess amount directly to the taxpayer's pre-validated bank account.

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TDS is deducted from several sources of income, including:

• Salary
• Fixed deposit interest
• Dividend income
• Professional and consultancy fees
• Commission and brokerage
• Contract payments
• Lottery winnings
• Online gaming income

When can you claim a TDS refund?

Excess tax deducted

Sometimes, employers may deduct more tax than what is actually payable. If the final tax liability is lower than the TDS deducted, employees can claim the excess amount by filing their ITR.

While filing the return, taxpayers must provide correct bank account details and IFSC code to ensure smooth credit of the refund.

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TDS on FD interest

If an individual's total taxable income is below the basic exemption limit, they can submit Form 15G to their bank at the beginning of the financial year to avoid TDS on interest income.

However, if the bank still deducts tax, the taxpayer can recover the excess amount by filing an ITR.

Senior Citizens and Form 15H

Senior citizens aged 60 years and above can submit Form 15H if their overall taxable income is below the exemption limit, even though interest income from fixed deposits exceeds the prescribed threshold.

In case TDS is deducted despite submitting Form 15H, they can claim a refund through the ITR filing process.

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How to claim a TDS refund

Step 1: Verify Form 26AS

Before filing an ITR, taxpayers should check Form 26AS, which is linked to their PAN and available on the Income Tax e-filing portal.

The statement reflects all TDS deductions, along with advance tax and self-assessment tax payments. Matching these details with income records helps avoid discrepancies.

Step 2: File the ITR

Taxpayers should accurately report all sources of income and ensure that TDS details correspond with Form 26AS.

The income tax portal automatically calculates the final tax liability. If the total TDS deducted exceeds the tax payable, the difference is shown as a refund.

Step 3: Complete E-Verification

After filing the return, taxpayers must complete e-verification through Aadhaar OTP or other prescribed methods.

Refund processing begins only after successful verification.

How to check refund status

Taxpayers can track their refund status by logging into the Income Tax e-filing portal and navigating to:

e-File → Income Tax Returns → View Filed Returns

After selecting the relevant assessment year and clicking on "View Details", taxpayers can view the processing history and refund status.

The status may appear as:

Refund issued
Refund partially adjusted
Full refund adjusted against outstanding demand
Refund failed

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When income tax refunds fail...

Refunds may fail because of:

PAN not linked with Aadhaar;
Bank account not pre-validated;
Incorrect account number or IFSC code;
Mismatch between PAN and bank records; or
Closure of the bank account mentioned in the ITR.

Therefore, taxpayers should ensure that Aadhaar-PAN linkage and bank account validation are completed well in advance.

Alert taxpayers!

A TDS refund becomes available whenever the tax deducted during the year exceeds the actual tax liability. Filing the ITR within the prescribed timeline and ensuring that bank details are correctly updated are the simplest ways to ensure a smooth and timely refund process.

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