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Do you need to pay additional tax, if TDS has been deducted?

A couple of high networth investors failed to declare income from infrastructure fund investments. The investors claimed that they had paid their taxes as these were deducted before the gains were distributed to them.

There are many transactions where taxpayers forget that taxes deducted at source doesn’t mean that the income isn’t taxable any further.

The income distributed after TDS deduction is accountable for taxes. TDS is essentially a way to curb tax evasion and hence a part of your total tax liability is deducted before handing over the money to you.

A bank or any entity deducts tax by estimating your income. Your actual tax bracket would be different when the entire income is taken into consideration.

So, if a bank has deducted TDS of 10% on your Fixed Deposit income (above Rs 10,000), you need to add the total interest earned to your income. This income will then be taxed as per your tax bracket – 10, 20 or 30%.

This doesn’t mean that only the FD income above Rs 10,000 is taxable. Though TDS is deducted only on FD income exceeding Rs 10,000, any income earned as interest on fixed deposits is taxable.

Even when you shift jobs during a financial year, the entire taxes payable aren’t deducted as each employer cuts taxes based on the income distributed individually, which may or may not be liable to income tax. The overall salary paid during the entire financial year from both the employers needs to be considered for calculating the tax payable.

Once the total tax liability is known, one can reduce this by the tax deducted at source. The balance has to be paid by way of self-assessment tax. There may even be a tax refund on certain instances.

To avoid situations where taxes are deducted even though your income is below the threshold limit, one needs to fill up forms such as 15G or 15H.

Ensure that your PAN is registered with the organisations you are dealing with. If the PAN is missing then they would deduct taxes at the rate of 20% instead of 10%, as per the Income Tax rules.

Verify whether the taxes that have been deducted from your income have been deposited to the government account. This is reflected in your Form 26 AS, which can be accessed through the income tax filing website or even through your net-banking facility. You should inform the tax deductor in case of discrepancies.

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H&R Block India is the subsidiary of the world's leading tax filing company, H&R Block, US. In India we provide online and personalised tax filing services for individuals, professionals and businesses. We also provide managed services for GST.

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