when TDS Deductions can be avoided

Even though many of us are familiar with tax filing, the process of TDS deduction is still confusing for many. When and where TDS is applicable, what are the procedures to reduce it and how to claim the deducted amount at the time of filing tax returns are few of the queries we have. So, here we discuss TDS deductions with a focus on how and when it can be reduced to help you in everyday life.

Understanding TDS:
The Indian tax structure is broadly a two dimensional approach towards payment of tax liabilities. In the first method- self assessment, taxes can be paid voluntarily after evaluation of income during a financial year. In the second method, Tax Deductions at
Source or TDS, as the name suggests, is the spot deduction of tax from the income source itself, at the time of earning. This is to simplify the taxation procedure for the government and to ensure that the payment making and receiving individual / company is accounting the same without fail.
TDS is applicable for earnings from several financial instruments and business transactions like sale of property, interest income from banks, commissions and incentives, payment received for contracts and services, vendors, dividends and awards or prices earned as money.
There is no uniform rate for TDS deduction. Depending on the source of earnings, it can range from 1% for sale proceeds to 30% .
From Salary and Commissions
It is mandatory as per Indian Income Tax rules that companies as well as working professionals who earn above the aforementioned figure should deduct tax at source from the payments they make.
Employers normally will ask employees to fill an investment declaration form. If you have done an early homework to save your TDS deduction by investing in several tax saving instruments under Sections 80C, 80D, or planning to do within that financial year, do declare the details in the form with required proofs to save TDS. If despite all your investments, your salary is still above the exemption limit, TDS will be deducted monthly.
The employer will issue a TDS certificate (also referred as Form No.16 (a)) at the end of the financial year which can be produced while filing income tax return to get the credit of the TDS ( if applicable) during the personal income tax assessment.
TDS is applicable for payments including commissions, service fees, professional fees and payment via contracts. Here the TDS certificate issued will be Form 16 B which like Form 16 A, can be produced while filing income tax return to get reversed if applicable.
TDS from Property, Awards and Incentives:
TDS is applicable in case of earnings sale of property, rental / lease income, cash prizes, lottery winnings etc. The amount of deduction may vary from 1% in case of sale proceeds to nearly 30% in case of cash awards.
Individuals seeking TDS refund in the above mentioned situations can submit form 15G/H which is a self deceleration that your income is below taxable limit. This is applicable only for Indian residents including senior citizens and Hindu Undivided Families (HUF’s). Form 15G can be filed by all Indian residents whose total financial income for the designated financial year is below the threshold limit while senior citizens need to avail Form 15H for the same purpose. It is imperative to note that Non resident Indians are not allowed the use of forms 15G and 15H and need to apply separately.
In case of rental income, TDS will be deducted only if the rent you receive is not less than Rs1.8 lakh a year. In case of joint ownership of rented / leased property, where the specific share of the property is decided, the limit of Rs 1.8 lakh can be claimed separately by each owner.
Income generated through bank deposits-
TDS is deductable on interest income paid by banks and financial institutions in respect of FDs (exceeding Rs.10000 in a FY) and term deposits (exceeding Rs.5000 in a FY).
If your income is below the taxable limit, but the interest earned from your deposits is above Rs 10,000, you can request your bank not to deduct tax by submitting form 15 G and 15 H to the bank at the beginning of the financial year.
Another effective way is to opt for multiple smaller fixed deposits across various banks.
Splitting the interest earned across two financial years in such a way that the overall annual interest earned from any of the FD not exceeding Rs 10,000 is another workable option.
In certain cases, dividing fixed deposits under two different heads can also be useful in avoiding. Individuals can divide deposits in their names and have some under a HUF account to avoid interest generation cross the taxable limit.
And never forget to carry your PAN card for all fixed deposits over Rs.50000, because on not receipt of PAN number banks may deduct 20% TDS which is non reversible.
Reversing TS collected
As you file your tax returns, you will know the tax bracket you are which determines the balance tax to be paid or that can be reversed. So do keep a track of the TDS that you have paid with Form 26AS or annual tax statement. All the taxes deducted on your behalf will be listed in it and it can be availed from the concerned sources along with Form 16. Otherwise missing taxes will be considered unpaid by the income tax authorities.
Source Deduction pattern How to reduce TDS How to reverse TDS Conditions (if any)
Salary Monthly by
employer
Submitting investment declaration with proofs At the time of filing ITR (with proofs of investments under 80C and 80D. Form 16 A Ensure to have a tax savings plan under 80c and 80D
Incentives , Commissions, Services, Contracts, Rental Income At the time of payment Possible only to reverse At the time of filing ITR (with proofs of investments under 80C and 80D. Form 16B Only if eligible under 80C and 80D clauses
Sale of Property At the time of transaction If the transaction as per papers is below 20 lakhs in panchayaths and below 50 lakhs in municipality / corporation limits NA As per costs shown in documents
Bank Deposits During interest remittance by bank Form 15 G / 15 H, Splitting of accounts across banks / HUFs ( if applicable), splitting of interest in two FY Form 15 G / 15 H, Will not be reversed if a single deposit is above 50,000 and PAN no. not submitted

Tax Laws

The history of Income Tax in modern India dates back to 1860 when the first Income Tax Act was introduced and which remained in force for a period of 5 years. This Act lapsed in 1865.

Thereafter Act-II of 1886 was the next landmark. This Act of 1886 was a great improvement on its predecessor. It introduced the definition of agricultural income in the form in which it stands today and the exemption it granted in respect of agricultural income has continued to be a feature of all subsequent legislations.

The year 1918 saw the introduction of Act VII of 1918 which recasted the entire tax laws. This Act was designed inter-alia to remedy certain inequalities in the assessment of individual tax payers under the 1886 Act.

Central Excise
Custom Law
Income Tax
Service Tax Law
Sales Tax and VAT

Income Tax Slabs For Financial Year 2011-12

For Male Citizen :

Then: The pre-budget period witnessed that the basic exemption limit was Rs. 1, 60, 000, where the total income of the assessee was in between Rs. 1.6 lakhs to Rs. 5 lakhs; tax levied on total income was 10%, in case the total income fell in between Rs. 5 lakhs to Rs. 8 lakhs; tax levied was 20% and whereas the total income was above Rs. 8 lakhs, the applicable rate of taxation was 30%.

Now: After the Union Budget 2011-12, there has been some amendments with respect to the figures. The limit has been raised by Rs. 20, 000. The basic exemption limit is Rs. 1, 80, 000, where the total income of the assessee is in between Rs. 1.8 lakhs to Rs. 5 lakhs; tax levied on total income will be 10%, in case the total income falls in between Rs. 5 lakhs to Rs. 8 lakhs; tax levied will be 20% and whereas the total income is above Rs. 8 lakhs, the applicable rate of taxation will be 30%.

For Female Citizen :

Then: The pre-budget period witnessed the basic exemption limit for women to be at Rs. 1, 90, 000, where the total income of the assessee was in between Rs. 1.9 lakhs to Rs. 5 lakhs; tax levied on total income was 10%, in case the total income fell in between Rs. 5 lakhs to Rs. 8 lakhs; tax levied was 20% and whereas the total income was above Rs. 8 lakhs, the applicable rate of taxation was 30%.

Now: The post budget of such exemption limit remains unchanged and the same shall be applicable as per the Union Budget 2011-12. The reason behind such ignorance is the new direct tax code which is likely to prevail from 1st April, 2012, which aims at abolishing the gender distinction system in terms of payment of tax.

For Senior Citizen :

Then:  The pre-budget period witnessed the basic exemption limit for senior citizens to be at Rs. 2, 40, 000, where the total income of the assessee was in between Rs. 2.4 lakhs to Rs. 5 lakhs; tax levied on total income was 10%, in case the total income fell in between Rs. 5 lakhs to Rs. 8 lakhs; tax levied was 20% and whereas the total income was above Rs. 8 lakhs, the applicable rate of taxation was 30%.

Now: After the Union Budget 2011-12, there has been some amendments with respect to the figures. The limit has been raised by Rs. 10, 000. The basic exemption limit is Rs. 2, 50, 000, where the total income of the assessee is in between Rs. 2.4 lakhs to Rs. 5 lakhs; tax levied on total income will be 10%, in case the total income falls in between Rs. 5 lakhs to Rs. 8 lakhs; tax levied will be 20% and whereas the total income is above Rs. 8 lakhs, the applicable rate of taxation will be 30%.

For Very Senior Citizen :

A new concept of very senior citizens has been introduced where people who have attained the age of 80 or more will fall. For this category, the assessee will get an exemption upto Rs. 5, 00, 000, earlier as these people fell under the senior citizen category, there limit was also restricted to Rs. 2, 40, 000. The rest of the part shall be similar to the present position of senior citizens, that is, from Rs. 5, 00, 000 to Rs. 8, 00, 000, 20% of the income shall be taxable and incase the income exceeds Rs. 8, 00, 000, 30% of the total income shall be taxable.

It shall be noted that in every case, the application of education cess and secondary and higher education cess shall prevail at the same rate of 2% and 1% respectively.

Advance Tax

As the name suggests, it refers to paying a part of your yearly taxes in advance. Advance tax is the income tax payable if your tax liability exceeds Rs 10,000 in a financial year. Advance tax should be paid in the year in which the income is received.

Advance tax is applicable when an individual has sources of income other than his/her salary. For instance, if one is earning through capital gains, interest on investments, lottery, house property or business, the concept becomes relevant.

Any rebate due fetches you an interest of 0.5 per cent every month, or, six per cent annually, as in the case of an income tax refund. However, if you don’t pay the advance tax on time, you’ll be charged one per cent every month, or, 12 per cent a year.

How To Save Income Tax In India?

As per the government law, it is mandatory for every citizen to pay the income tax. Tax assessment takes place every year in the month of March. Government has given so many benefits to the taxpayers. Tax payment is applicable for a person who is generating profit by any mode either by the business or from the job. In any of the public or private limited company, there are shareholders then the tax will not be exempted on the individual basis. The calculation is based on the annual profit generated by the organization.

In India, there are various tax slabs for the male and female and as per the annual salary, the tax deduction takes place. If a male individual earns (in Rs) 160,001 to 500,000, the tax would be 10% if it exceeds from 500,000 to 800,000 the tax would be 20% if it exceeds from 800,000 the tax would be 30%. Tax slabs for the female individual is different from the male individual, the tax limit for the female start from 190,001. For 190,001 the tax is 10%, from 500,000 to 800,000 tax is 20% whereas for above 800,000 tax would be 30%.

To get the tax benefit,  it is important to show the investment proof. Tax waiver is applicable if the investment has done in the following:

Mutual funds – There are several government and private mutual funds available in the market such as State Bank of India mutual funds, Franklin Templeton, Kotak Mahindra and ICICI. Investor has to take care that tax waiver is available only on those mutual funds that have a locking period; a fund without a locking period is not eligible for the income tax benefit.

Home Loan – If an individual has purchased any property on loan, a tax waiver is applicable on it.

House Rent – House rent is another mode to save the income tax. While filing for income tax, tax receipt should be attached.

Insurance Policy- Government has given tax benefit on different type of insurance policies such as life insurance policy and health Care. This should be noted that no tax benefit is given for the General insurance like motor insurance etc.

While filing for the income tax it is useful to attach the receipt of the documents as per the above list.

E-filing of income tax return is an easy, 15-minute job. And it is definitely smoother than finding a tax consultant, haggling for the right price and then waiting endlessly for him to do the job at his whims.

So, how do you do it?

STEP 1

Go to the website of directorate of income tax, India, and register yourself, that is if you are not registered already. As you register, you need to fill in your PAN number and other details in order to set your login and password.

STEP 2

Once you are done with registration, log out and log in again with your PAN number as user ID and the new password you have set earlier. Click on e-filing A.Y. 2010-11 on the left side and download the e-filing form for INDIVIDUAL, HUF (HUF stands for Hindu undivided family)

STEP 3

The form comes in a ZIP file. Save it to your desktop and extract the Excel file from it to a new folder. Open the excel file and enable macros. Mind you, you have to enable macros in order to complete the process.

STEP 4

Fill in details like Name, Address, City, State, Pin Code in the sheet for INCOME DETAILS; fill in your PAN number wherever required and then fill in details of your income, investments and tax paid as provided to you in the Form 16 as per the instructions on the sheet. Then click on the VALIDATE button to check. If the details are correct. It will show the sheet is ok. (That is if no errors are found).

STEP 5

The next sheet of the file is TDS. Fill in the details for No 23 only if you have income only from salary. If you have income other than salary, fill in details for No 24 also. Fill in details of TAN number, name of company, address, city, state, pin code as given in form 16.

STEP 6

Fill in details of income charged under salaries, deductions from Chapter VI-A, tax payable and tax deducted. All these information is found on your Form 16. Click on VALIDATE button to check for correctness.

STEP 7

Next sheet is taxes paid and verification. Fill in details of name, father’s name, place, date and PAN number under the VERIFICATION section shown in RED. Click validate once again. If all the three sheets are shown OK on validation, you are ready to generate an XML file of the details.

STEP 8

Click on Generate XML and it will ask you to save the file. Once saved, go back to the website and log in (if you are logged out) with your user name and password. On the left side, click on submit return with 2010-11 as assessment year. Upload your generated XML to the site. Your e-filing is done.

STEP 9

It sends you a copy of acknowledgement to your email ID and also allows you to download the acknowledgement by clicking on blue link. The acknowledgement again comes in a ZIP file. Extract the file, take a printout of the PDF file and sign it manually.

STEP 10

Send a signed Acknowledgement to Income Tax Department address shown at the bottom of the PDF file by ORDINARY POST only. You will get a confirmation from IT department within one week.

Save Income Tax : wiser ways of saving income tax

For preparing calculative and fast income tax, you should to keep records of all the receipts and bills in a systematical manner. Like this, you can do more changes in the expenses, for the next year to save your tax.

The employers of the company or office can keep the record of their official traveling expenses like costs to go to seminars, conferences, cost of hotels, airfare, taxi charges, car rental, parking, toll tax etc. All these expenses are 100% deductible.

The health expenses of workers are also included as it helps to save your tax. These medical expenses are deductible and you can transfer the non-deductible health expenses into legitimate business expense.

For saving the income tax, entertainment is one another option. Earlier, there was no deduction on entertainment sources. But now it has approved and through entertainment sources, you can reduce income tax.

Services / Online PAN Verification / Registration Status Track

For PAN Verification Registration Status Track in  language please click here.
https://onlineservices.tin.nsdl.com/TIN/statusCheckForEntity.do
The organisation can enquire the status of its registration on the basis of its acknowledgment number. On successful registration a screen displaying status as accepted along with a user ID will be displayed, if registration is rejected status displayed will be rejected.

Refund Banker

The 'Refund Banker Scheme,' which commenced from 24th Jan 2007, is now operational for taxpayers assessed all over India (except at Large Taxpayer Units) and for returns processed at CPC (Centralized Processing Centre) of the Income Tax Department at Bangalore.

In the 'Refund Banker Scheme' the refunds generated on processing of Income tax Returns by the Assessing officers/ CPC-Bangalore are transmitted to State Bank of India, CMP branch, Mumbai (Refund Banker) on the next day of processing for further distribution to taxpayers.

Refunds are being sent in following two modes:


RTGS / NECS: To enable credit of refund directly to the bank account, Taxpayer.s Bank A/c (at least 10 digits), MICR code of bank branch and correct communication address is mandatory.

Paper Cheque: Bank Account No, Correct address is mandatory.
Taxpayers can view status of refund 10 days after their refund has been sent by the Assessing Officer to the Refund Banker - by entering 'PAN' and 'Assessment Year' below.

Other Refunds

Status of 'paid' refund, being paid other than through 'Refund Banker,' can also be viewed at www.tin-nsdl.com by entering the 'PAN' and 'Assessment Year' below.

'Refund paid' status is also being reflected in the 'Tax Credit Statements' in Form 26AS.

Online Tax Refund Status

https://tin.tin.nsdl.com/oltas/refundstatuslogin.html
FAQ for refund banker - http://tin-nsdl.com/faqrefund.asp
Railway Refund Rules - http://www.indianrail.gov.in/refund_Rules.html
Railway Claims and Refunds - http://www.claims.indianrail.gov.in/claims/index.jsp

Income tax refund status and it refund status can be easily checked nowadays through internet. online tax refund status can be easily checked just with a click of the mouse, income tax refund status can be easily checked online.

Procedure:

For checking the tax refund status, Firstly it should be checked that whether a person’s state or federal tax return has been accepted by IRS through refund status e filing.
For online tax refund status, the dates of tax refunds must be checked if it has been accepted through refund status e filing i.e. acceptance dates, transmission dates of tax return and IRS deposit dates of tax refund.
 tax refund status can also be checked by calling to 1-800-829-4477for the automated information at all hours in a day.
The online tax refund status will be available for only those taxpayers whose refunds have to go through the scheme i.e. refund banker pilot scheme.
The income tax refund status and online tax refund status can be checked through NSDL website also.
To check the it refund status and income tax refund status  the form has to be filled and submitted and then the person will be guided to the new page from where the status can be checked through pan.
Before checking tax refund status or income tax refund status, tax return status must be checked and it should be made sure that the tax return has been accepted by IRS. The information and details about tax refund status and it refund status can be attained in 72 hours after the acknowledgement by the IRS of e-file tax return receipt or after three to four weeks after the mailing of a paper tax return.

For checking it refund status, it should be made sure that a person has a copy of tax return handy. The information required from the tax return includes:

Filing status
Social security number
Exact amount (whole dollar) of refund
Details Of Checking Tax Refund Status Or It Refund Status :

Check the Tax return status on efile.com. The status can be seen as soon as a person signs in.
Check the tax refund status.
Thus checking online tax refund status has become a very easy task with the advancement of online environment.