In case of excess deduction of tax at source, claim of refund of such excess TDS can be made by the deductor. The excess amount is refundable as per procedure laid down for refund of TDS vide Circular No.285 dt.21-10-1980.
The difference between the actual payment made by the deductor and the tax deducted at source or deductible, whichever is more will be treated as the excess payment made. This amount is to be first adjusted against any existing tax liability under any of the Direct Tax Acts. After meeting such liability, the balance amount is to be refunded.
Circular No. 2/2011 Dated 27-04-2011
Section 200A of the Income-tax Act, 1961 - Deduction of tax at source - Processing of statement of tax deducted at source - Procedure for regulating refund of excess amount of TDS deducted and/or paid
CIRCULAR NO. 2/2011 [F.NO. 385/25/2010-IT(B)], DATED 27-4-2011
The procedure for regulating refund of amount paid by the deductor in excess of the tax deducted at source (TDS) and/or deductible is governed by Board circular No. 285, dated 21-10-1980.
2. Subsequent to issue of circular No. 285, new sections have been inserted under Chapter XVII-B of the Income-tax Act, 1961. References have been received by the Board regarding inclusion of these sections also for the purpose of issue of refund of excess amount of the TDS deducted/deductible.
3. In consideration of the above and in supersession of the circular No. 285, dated 21-10-1980, the Board prescribes the following procedure for regulating refund of amount paid in excess of tax deducted and/or deductible in respect of TDS on residents covered under sections 192 to 194LA of the Income-tax Act, 1961. This circular will not be applicable to TDS on non-residents falling under sections 192, 194E and 195 which are covered by circular No. 7/2007 issued by the Board.
4. The excess payment to be refunded would be the difference between:
(i) the actual payment made by the deductor to the credit of the Central Government; and
(ii) the tax deductible at source.
4.1 In case such excess payment is discovered by the deductor during the financial year concerned, the present system permits credit of the excess payment in the quarterly statement of TDS of the next quarter during the financial year.
4.2 In case, the detection of such excess amount is made beyond the financial year concerned, such claim can be made to the Assessing Officer (TDS) concerned. However no claim of refund can be made after two years from the end of financial year in which tax was deductible at source.
5. However, to avoid double claim of TDS by the deductor as well as by the deductee, the following safeguards must be exercised by the Assessing Officer concerned:
5.1 The applicant deductor shall establish before the Assessing Officer that:
(i) it is a case of genuine error and that the error had occurred inadvertently;
(ii) that the TDS certificate for the refund amount requested has not been issued to the deductee(s); and
(iii) that the credit for the excess amount has not been claimed by the deductee(s) in the return of income or the deductee(s) undertakes not to claim such credit.
5.2 Prior administrative approval of the Additional Commissioner or the Commissioner (TDS) concerned shall be obtained, depending upon the quantum of refund claimed in excess of Rupees One Lakh and Rupees Ten Lakh respectively.
5.3 After meeting any existing tax liability of the deductor, the balance amount may be refunded to the deductor.
6. In view of provisions of section 200A of the Income-tax Act prescribing processing of statement of TDS and issue of refund with effect from 1-4-2010, this circular will be applicable for claim of refunds for the period upto 31-3-2010.
951. Procedure for regulating refund of amounts paid in excess of tax deducted and/or deductible
1. The Board have been considering the manner of refunding the amount paid in excess of the tax deducted and/or deductible (whichever is more) under sections 192 to 194D of the Income-tax Act. The Board are advised that such excess payment can be refunded, independently of the Income-tax Act, to the person responsible for making such payment subject to necessary administrative safeguards.
2. In supersession of the earlier instruction on the subject, the following procedure is laid down to regulate the refund of such excess payments.
3. The excess payment would be the difference between the actual payment made by the deductor and the tax deducted at source or that deductible, whichever is more. This amount should be adjusted against the existing tax liability under any of the Direct Tax Acts. After meeting such liability the balance amount, if any, should be refunded to the assessee.
4. Where the tax is deducted at source and paid by the branch office of the assessee and the quarterly statement/annual return (in case of salaries) of tax deduction at source is filed by the branch, such branch office would be treated as a separate unit independent of the head office. After meeting any existing tax liability of such a branch, which would normally be in relation to the deduction of tax at source, the balance amount may be refunded to the said branch office. The Income-tax Officer, who will refund the amount, would be the one who receives the quarterly statement/annual return (in case of salaries) of tax deduction at source from that branch office and keeps record of the payments of tax deduction at source made by that branch.
5. The adjustment of refund against the existing tax liability should be made in accordance with the present procedure on the subject. A separate refund voucher to the extent of such liability under each of the direct taxes should be prepared by the Income-tax Officer in favour of the “income-tax department” and sent to the bank along with the challan of the appropriate type. The amount adjusted and the balance, if any, refunded would be debitable under the sub-head “Other refunds” below the minor head “Income-tax on companies”—major head “020—Corporation Tax” or below the minor head “Income-tax other than Union Emoluments”—major head “021—Taxes on incomes other than corporation tax” according as the payment has originally credited to the major head “020—Corporation tax” or the major head “021—Taxes on incomes other than corporation tax”.
6. Since the adjustment/refund of the amount paid in excess would arise in relation to the deduction of tax at source, the recording of the particulars of adjustment/refund should be done in the quarterly statement of TDS/Annual return (in case of salaries) under the signatures of the Income-tax Officer at the end of the statement, i.e., below the signatures of the person furnishing the statement.
Circular: No. 285 [F. No. 275/77/79-IT(B)], dated 21-10-1980.
