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TDS refunds will be expedited
Mon, 21 Mar 2011
TDS refunds will be expedited

QUESTION: There have been numerous complaints about the delay in getting refund of excess tax deducted at source. Some major steps have been taken by the Central Board of Direct Taxes in Instruction No.2 of 2011 dated February 9, 2011. Kindly clarify the same so that a large number of refundees may become aware of what could be expected.

ANSWER: Refunds are pending largely because of the mismatch between the TDS reports in Form AS 26 from the deductors and the Permanent Account Number (PAN) of the deductees. There has been considerable relaxation of the condition in respect of pending refund claims so as to clear the backlog of such returns claiming refund. The present instructions are as under:

(i) In all returns (ITR-1 to ITR-6), where the difference between the TDS claim and matching TDS amount reported in AS-26 data does not exceed Rs.1 lakh, the TDS claim may be accepted without verification.

(ii) Where there is zero TDS matching, TDS credit shall be allowed only after due verification. However, in case of returns of ITR-1 and ITR-2, credit may be allowed in full, even if there is zero matching, if the total TDS claimed is Rs.5,000 or less. ITR-1 relates to returns of individuals having income from salary/ pension/ family pension and interest. ITR-2 refers to individuals and Hindu Undivided Families not having income from business or profession.

(iii) Where there are TDS claims with invalid TAN, TDS credit for such claims is not to be allowed.

(iv) In all other cases TDS credit shall be allowed after due verification.

The above instructions would mean that notwithstanding the discrepancies in AS-26, claims would be allowed for all returns for assessment year 2010-11, where the claim for refund does not exceed Rs.1 lakh.

In respect of individuals and Hindu Joint Families without business or professional income, where the discrepancy is such that there is zero-matching, that is the assessee's name does not appear at all in AS 26, there is no such automatic refund, but the refund would still be considered after due verification.

But where the claim is for less than Rs.5,000 even verification will not be necessary. TAN number should, however, be correct. This is an overriding requirement.

In all other cases, refund can be allowed after “due verification”.

These are major steps, which will help a large number of refundees, especially senior citizens, where the claim is not expected to be substantial.

An explanation as to what “due verification” means would have been helpful as such explanation would give better guidance to the assessing officers, while assisting the refundees to be prepared with what is expected of them. It could have probably been advised that tax deduction certificate issued by the deductor and presented before the assessing officer during the verification proceedings would ordinarily be accepted. In cases of doubt, it could be accepted after getting indemnity from the deductee. Since it should be possible for the authorities to verify deduction at the end of the deductor without placing any impossible burden on the deductees, this should also be done as part of the process of verification. Further instructions on these lines will be most useful and will better serve the department's anxiety to clear the backlog while resolving a large number of pending complaints.

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