This article is meant for people who are not liable to pay income tax but have fixed deposits or investments on which TDS is likely to get deducted.
What is TDS?
TDS stands for Tax Deducted at Source .It is an advanced tax deducted on earnings and is aimed at providing regular revenue to the government. The common investment avenues where TDS is deducted are-
- Interest on term/fixed deposits exceeding Rs 10,000/- an year
- Commission income earned by mutual fund/insurance agents exceeding Rs 5000/- per annum
This makes perfect sense. But the problem arises when TDS is deducted on the fixed deposit interest or commission income earned by individuals who do not have a tax liability –either because they do not have a salary income or their total income is within the exemption limit or in some cases the rate of tax is lesser than TDS rate. And the only way these people can get a TDS refund is that they have to necessarily file their returns, specify the excess tax paid and ask for a refund. And wait for getting the elusive refund which could take months.