Getting a refund of extra TDS deposited by tenants is tougher than it must be

AIS is an in depth abstract of a taxpayer’s info supplied in Form 26AS, which particulars the quantities of tax deducted at supply (TDS) or tax collected at supply (TCS) from numerous earnings streams, aside from the advance tax/self-assessment tax paid and high-value transactions. 

Recently, many landlords had been taken abruptly whereas finishing up this train in respect of their rental incomes. They discovered that the quantity of TDS credit score on their rental incomes in Form 26AS was considerably decrease than what was deducted and deposited by their tenants.

Individual tenants paying lease in extra of ₹50,000 per 30 days had been required to deduct 5% as TDS and deposit the quantity with the exchequer beneath Section 194IB of the Income Tax Act. This TDS price was diminished to 2% with impact from 1 October 2024.

In many instances, resulting from lack of knowledge in regards to the price change, tenants deducted and deposited TDS at 5% for FY25 by their annual challan-cum-TDS assertion prescribed in type 26QC.

Ideally, as per the regulation, the total TDS credit score of the particular tax quantity deducted and deposited by tenants (even when greater than the relevant price) must be mirrored in Form 26AS. The extra TDS credit score may be claimed by the landlords whereas submitting their ITRs.

However, TDS credit score of solely 2% is mirrored in Form 26AS regardless that the tenants had deducted and deposited TDS of 5%. This seems to be resulting from a glitch within the TRACES utility, which limits the supply of TDS credit score to the extent of two% solely.

Refund purposes

This defective TDS utility is inflicting undue hardship to landlords and tenants as a result of getting a refund is just not straightforward. Taking cognisance of the issue, the Income Tax Department’s Centralised Processing Centre (CPC) in Bengaluru has been sending mails to deductor tenants, prompting them to assert refunds of the surplus TDS deposited by them by making use of on-line in Form 26B. A hyperlink containing a observe on the step-by-step process for submitting Form 26B can be supplied.

To declare the refund of extra TDS quantity, tenants ought to log in to the TRACES web site. They have to click on on ‘Request for Refund’ beneath the ‘Statements/Forms’ tab and choose the explanation “I’ve made an extra fee of tax by mistake” from the drop-down checklist.

They then want so as to add the related challan 26QC and fill in particulars together with acknowledgement quantity, monetary and evaluation years, date and quantity of TDS deposit, BSR code, and challan serial quantity. The claimable refund quantity of extra TDS will get auto populated in Form 26B. They then add their checking account particulars to get the refund.

The final phase of Form 26B accommodates certification to be supplied by applicant tenants that the refunded quantity shall not be claimed as TDS credit score and there’s no excellent TDS demand of their names. Applicants lastly have to e-verify Form 26B, both by their digital signatures or by Aadhaar-based OTP verification and submit it on-line.

The steering observe means that applicant tenants will robotically get refunds of extra TDS quantities of their financial institution accounts after e-filing their utility in Form 26B. But, in actuality, when tenants e-file Form 26B, a message seems, directing them to take a printout of the Form 26B acknowledgement and ship it to the jurisdictional TDS officer for additional verification.

Lengthy guidelines

When candidates ship such utility acknowledgements to the officer involved, they’re requested to furnish quite a few different information and paperwork. These embody the rental settlement, financial institution assertion for your complete 12 months, evidencing fee of lease and deposit of TDS, challan-cum-statement in Form 26QC, copy of the PAN card, and a cancelled cheque.

The applicant tenants are additional requested to submit a notarised indemnity bond on stamp paper of ₹100, endeavor to indemnify the Income Tax Department towards any possible losses and calls for arising out of such refund claims. Even after offering the plethora of information and paperwork, granting the refund continues to be on the discretion of the jurisdictional TDS officer.

Article 265 of the Constitution of India mandates that no tax may be collected besides with the authority of regulation. So, the onus of refunding the surplus tax quantity ought to have been on the income division. Instead, it has been transformed into an onerous job for tenants who should run from pillar to publish to get their in any other case Constitutionally assured refunds.

Mayank Mohanka is founding father of TaxAaram India and a companion at S.M. Mohanka & Associates.