Bharat Tax Services: Claim Extra Refund for Overpaid Taxes

Filing your ITR with Bharat Tax Services ensures that you can accurately claim any extra taxes you have paid during the financial year. Here’s a detailed explanation, complete with an example, relevant sections of the Income Tax Act, and how deductions under Section 80 and exemptions can help reduce tax liability.

Why Employers Deduct Extra Tax?

Employers deduct tax at source (TDS) based on an estimated income tax liability for the financial year. This estimation might sometimes lead to over-deduction due to:

  • Incorrect Estimation: Employers estimate the tax liability based on the information available at the beginning of the year, which might not include all possible deductions and exemptions.
  • Changes in Salary Structure: Any changes in salary components such as bonuses, allowances, and increments can affect the tax liability.
  • Non-Declaration of Investments: Employees may fail to declare their investments and eligible deductions to their employers timely.

How Deductions and Exemptions Reduce Tax Liability

Deductions under Section 80:

  1. Section 80C: Allows a deduction of up to ₹1,50,000 for investments in PPF, NSC, life insurance premiums, ELSS, etc.
  2. Section 80D: Deduction for medical insurance premiums:
    • Up to ₹25,000 for self, spouse, and children.
    • Additional ₹25,000 for parents (₹50,000 if parents are senior citizens).
  3. Section 80E: Deduction for interest on education loans.
  4. Section 80G: Deduction for donations to specified funds and charitable institutions.

Exemptions:

  1. House Rent Allowance (HRA): Exempt under Section 10(13A) if the employee pays rent for accommodation.
  2. Leave Travel Allowance (LTA): Exempt under Section 10(5) for travel expenses incurred for domestic travel.
  3. Standard Deduction: A flat deduction of ₹50,000 from salary income.

Example: Claiming Extra Refund

Scenario:

  • Mr. Ramesh is a salaried employee with a gross annual income of ₹10,00,000.
  • His employer estimated his tax liability without considering certain deductions and exemptions.
  • TDS of ₹1,00,000 was deducted during the financial year.

Actual Tax Calculation:

  1. Gross Income: ₹10,00,000
  2. Deductions:
    • Section 80C (PPF, LIC, etc.): ₹1,50,000
    • Section 80D (Health Insurance): ₹25,000
  3. Exemptions:
    • HRA: ₹60,000
    • Standard Deduction: ₹50,000

Taxable Income: Gross Income – Deductions – Exemptions = ₹10,00,000 – ₹1,50,000 (80C) – ₹25,000 (80D) – ₹60,000 (HRA) – ₹50,000 (Standard Deduction) = ₹7,15,000

Tax Calculation (for FY 2022-23):

  • Up to ₹2,50,000: Nil
  • ₹2,50,001 to ₹5,00,000: 5% of ₹2,50,000 = ₹12,500
  • ₹5,00,001 to ₹7,50,000: 10% of ₹2,50,000 = ₹25,000
  • Total Tax: ₹37,500
  • Education Cess (4%): ₹1,500
  • Total Tax Payable: ₹39,000

Refund Calculation:

  • TDS Deducted by Employer: ₹1,00,000
  • Total Tax Payable: ₹39,000
  • Refund Due: ₹1,00,000 – ₹39,000 = ₹61,000

Relevant Sections:

  • Section 237: Allows for a refund if any person has paid more tax than what is due as per their assessed income.
  • Section 139(1): Filing ITR within the due date is necessary to claim refunds for any excess tax paid or deducted.

How Bharat Tax Services Can Help

  1. Expert Guidance: Our team reviews your financial details and ensures all eligible deductions and exemptions are claimed.
  2. Accurate Filing: We ensure your ITR is filed accurately, reflecting the correct tax liability and maximizing refunds.
  3. Timely Submission: Filing your ITR on time is crucial to avoid penalties and ensure timely processing of refunds.
  4. Proactive Approach: We help you plan and declare your investments and deductions to your employer to minimize TDS deductions upfront.

Contact Us

For more information or to get started with your ITR filing, connect with us:

Let Bharat Tax Services handle your ITR filing, ensuring a smooth, accurate, and beneficial experience. Contact us today!

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