1. The Central Board of Direct Taxes has issued circular No. 2/2011 [F. No. 385/25/2010-IT(B)] dated 27 April 2011 prescribing the procedure regulating refund of amount paid in excess of tax deducted and/or deductible in respect of payments to residents as covered under sections 192 to 194LA of the Income-tax Act (“ITA”). The Circular will be applicable for claim of refunds for the period upto 31 March 2010.
– The excess payment to be refunded would be the difference between the actual payment made by the deductor and the tax deductible at source.
– In case the 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.
– In case the excess payment is discovered by the deductor after the financial year concerned, the refund claim can be made to the TDS Officer concerned. No claim of refund can be made after two years from the end of the financial year in which tax was deductible at source.
– The deductor should establish before the TDS Officer that:
· it is a case of genuine error and that the error had occurred inadvertently;
· the TDS certificate for the refund amount requested has not been issued to the deductee; and
· the credit for the excess amount has not been claimed by the deductee in the return of income or the deductee undertakes not to claim such credit.
– Prior administrative approval of the Additional Commissioner or the Commissioner (TDS) needs to be obtained by the TDS Officer in case of refunds of INR 0.1 million and INR 1 million respectively.
– After meeting any existing tax liability of the deductor, the balance amount may be refunded to the deductor.
2. Refunds for period after 31 March 2010 will be covered by provisions of section 200A which prescribes processing of TDS statements and issue of refund.
3. The said circular will not be applicable to TDS on non-residents falling under sections 192, 194E and 195 of the ITA which are covered by Circular No. 7/2007 dated 23 October 2007.