Have you gotten a tax refund that is less than what you declared on your income tax return (ITR) for Fiscal Year 2020-21? If you answered yes, you’re not alone; this year, numerous tax return filers had their bank accounts credited with lesser tax refund amounts. This is due to the fact that the new income tax site did not evaluate or account for the entire tax credit provided in Form 26AS for these tax return filers.
Form 26AS does not contain/contains partial amount of TDS with regard to the TAN indicated in schedule TDS 1/TDS 2/TCS, according to the explanation provided by the income tax department in the intimation letter.
The TDS amount claimed by these ITR filers, on the other hand, is the same as the amount shown on their individual Form 26AS. The income tax portal allows you to download Form 26AS. Data shown on one area of the portal appears to be out of sync with/not completely taken into consideration by the processing programme.
“We have seen more than ten cases where the income tax department does not give full TDS credit, as shown in Form 26AS, at the time of ITR processing, resulting in individual taxpayers receiving less income tax refund than what is actually due to them,” says Abhishek Soni, CEO of Tax2win.in, an ITR filing website.
According to tax specialists and chartered accountants, anything like this is unusual and does not usually occur during the ITR filing season. Soni explains, “However, there have been instances this year when the pre-filled data obtained on the new income tax site reveals a discrepancy in the TDS amount available against an individual’s PAN, i.e., the entire TDS as shown in Form 26AS is not fetched/pre-filled into the ITR. Despite the fact that the TDS amount is rectified when filing the ITR, it appears that the income tax department processes the ITR using pre-filled data rather than information from Form 26AS.”
In the notification notice, there is a discrepancy in the rationale for the intimation.
TDS amount available in Form 26AS
According to the taxpayer’s Form 26AS, the total amount of TDS deposited against the individual’s PAN for FY 2020-21 is Rs 4532.31, as seen in the screenshots above. This is the same amount that the individual claimed on his or her ITR form. The income tax department, on the other hand, gives a tax credit of Rs 2,246 while processing the ITR. The amount of TDS credit disallowed by the tax department is Rs 2,286, or over half of the TDS deposited against the individual’s PAN. The point is that the TDS credit has been withheld despite the fact that it appears on the individual’s Form 26AS, which should not typically be the case. This is due to the fact that Form 26AS is meant to represent the TDS information held by the IRS.
Here are three examples of full refund amounts that the IRS has disallowed, as well as what taxpayers may do to correct the problem:
Case #1: The income tax department has disallowed a refund of Rs 2,286.
Case #2: The income tax department disallowed a refund of Rs 13,106.
The entire TDS deposited against/credited to the PAN on the taxpayer’s Form 26AS is Rs 20,365, however the TDS credit issued by the income tax department (after processing ITR) in the intimation notice is Rs 7,259. As a result, the income tax department has refused a tax credit of Rs 13,106, resulting in a reduced tax refund.
Case #3: Income tax refund of Rs 9,707 was refused by the Income Tax Department.
The entire amount of TDS submitted against the PAN for FY 2020-21 is Rs 48,331, however the income tax authority has provided a TDS credit of Rs 38,624. As a result, the income tax department denies a tax credit of Rs 9,707 to the taxpayer.
In such a case, what can taxpayers do?
“If the income tax refund you receive is less than what you claimed owing to a denial of TDS credit as reflected on Form 26AS,” Soni explains, “an individual would have to file a correction request under section 154 to claim the balance tax refund.”