TDS credit should be allowed on the basis of Form 26AS, even if the payee has not claimed the same in the return of income (due to non updation of Form 26AS) but has claimed TDS credit during the assessment proceedings (during which time the updated TDS credit is reflected in Form 26AS)

Issue/Justification

TDS credit should be allowed on the basis of Form 26AS, even if the payee has not claimed the same in the return of income (due to non updation of Form 26AS) but has claimed TDS credit during the assessment proceedings (during which time the updated TDS credit is reflected in Form 26AS)

Options available for claiming TDS credit to the taxpayer

A taxpayer claims credit of TDS on the basis of TDS figures reflected in Form 26AS at the time of filing the return of income.

Continuous update of Form 26AS

Later on, the figures of TDS reflected in Form 26AS undergoes change owing to update/revision of TDS returns by tax deductor, thereby taxpayer needs to claim such enhanced credit of tax deducted by deductor on behalf of taxpayer. Taxpayer has following options to avail such enhanced tax credit.

Filing of Revised Return

A taxpayer can claim enhanced tax credit by filing of revised return within the time specified for filing of revised return. However, Form 26AS may keep on changing/enhancing post filing of revised return and hence there is still a need for taxpayer to lodge additional claim for tax credit.

Filing of enhanced claim of TDS credit as per updated Form 26AS during the course of assessment proceedings

Once the time limit for filing the revised return expires, the option to claim such enhanced TDS credit is to lodge the claim during the course of assessment proceedings along with the necessary supporting evidence. However, some of the AO’s do not accept such claims during assessment proceedings and mention that taxpayer should have claimed it in the revised return of income. The tax payer is unable to claim the said enhanced TDS credit as the time limit for filing the revised return is already lapsed. Then the other option left with the taxpayer is:

  • Filing of rectification application – In case the relevant assessment has already been completed, the request for Form 26AS based increased TDS credit claim by way of rectification under section 154 is denied on the ground that the same has not been claimed in the revised return of income.
  •  Approach CBDT under section 119(2)(b) of the Act for the said claim –

However as per Circular No. 9/2015 dated 9 June, 2015, the taxpayer has to forgo interest on eligible refunds under this section and hence not a suitable option for taxpayer.

Problems faced by the taxpayer

The taxpayer has to file a revised return with the figure of tax credit appearing in the Form 26AS at the time of filing the revised return. However, this figure changes as the Form 26AS gets updated during the time of assessment proceedings. Thus, the taxpayer has to first file a revised return and then again request for the updated tax credit as per the revised Form 26AS during the assessment proceedings. However, as stated above the AOs do not accept the said claim and accordingly, the taxpayer has to approach CBDT under section 119(2)(b) of the Act. Filing of revised return to claim TDS credit already appearing in Form 26AS and/or approaching CBDT under section 119(2)(b) of the Act, would only be procedural formalities which may not serve any useful purpose but would claim lot of time of taxpayers and the tax officers.

Further in a situation where intimation under Section 143(1) of the Act is issued subsequent to the filing of return of income, where no proper assessment proceedings have taken place, there is no mechanism for the taxpayer to make a claim for TDS credit.

Suggestion

Instructions could be issued to the field officers to accept Form 26AS based TDS credit claims during assessment proceedings (or even after completion of assessment proceedings), subject to the only condition that the taxpayer furnishes evidence that the corresponding income had been shown in the income tax return.

Instructions should also be issued for processing of rectification application filed by the taxpayer under section 154 of the Act for revising its claim for credit of TDS as per updated Form 26AS

This would save substantial time of the tax officers and taxpayers. This taxpayer friendly measure would not cause any loss to the revenue.

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)

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