As the year end is right around the corner the assessee have already started calculating their yearly income and the advance tax deadline has just passed few days ago, where assessee computes his total income of the year and pays tax in advance.

Other than the advance tax the other source of tax payment by the assessee is TDS (tax deducted at source, where the tax gets deducted from the assessee various income. For instance, Mr. A is a salaried assessee is earning a salary of Rs. 3, 00, 000 p.a. and interest from fixed deposit of Rs. 2, 00, 000.  We assume that total salary of Mr. A is 3 Lakh and No TDS gets deducted from the salary, on the other hand Mr. A has the option either to get TDS deducted or else avoid deduction of TDS from the interest income by providing form 15G/H to the respective bank.

In the above situation Mr. A would rather go for deduction of TDS from the interest income, of Rs. 20000 (200000*10%) under section 194A of the income tax act 1961. There are some pros and cons Mr. A will get if the TDS is getting deducted from the income which is further explained below:

Pros of getting TDS deducted from the total income:

(i) Reliefs from calculating advance tax:

If you’re total income tax liability is more than Rs. 10000 than you have to calculate the advance tax by yourself on the total income to be earned during the year. By deducting TDS from your income the advance tax liability calculation part burden is reduced from your end. Also you may end up saving the professional fees, which otherwise you would pay if you had hired professionals for calculating your advance tax liability.

(ii) Savings from paying advance tax:

if you are relived from calculating advance tax then at the same time you are also benefitted from not paying the advance tax to the government.

(iii) Relief from paying interest to the government:

Under the income tax act where the assessee fails to calculate and pay the advance tax then interest at the rate of 1% is charged on the total income tax liability arising at the time of filing of return under section 234B and 234C. However, where TDS is deducted from the income of the assessee then no interest is levied under the act. Hence, a relief from paying an extra money from your kity.

(iv) Benefit of Interest on late refund of TDS by department:

Sometimes the delay by the department may get you benefitted and earn you some return also in case you are a deductee. As per section 244A of the income tax act if a refund is granted under section 143(1) and there is a delay from the department end for the disbursement of refund then the department will pay you simple interest at the rate of 0.5% per month or part of the month till the refund is paid. For the purpose of this provision the period of refund will be taken from 1st april of the assessment year till the date of granting the refund.

Cons of getting TDS deducted from the total income:

i. Delay in refund of TDS from the department:

In some cases a delay in the TDS refund may be an issue for the assessee as its working capital is blocked by the department.

ii. Fees to the professionals:

In some cases the assessee even after constant follow-ups, fails to get the refund processed by the department. Then in such situation he takes help of the professionals who further help in processing of refund by approaching the department officials. This activity will finally lead to heavy payment of professional fees to the experts, which sometimes may exceed the amount of refund.

I finally conclude that although the assessee regrets paying the TDS to the government but they don’t see the benefits attached to it. They are of the view that they might not get back the hard earned money once paid to the government, but it is just a myth. Instead of thinking it as a burden we may think it as a pre-planned help to our self as we may not end up paying advance tax or the interest to the government from our kity.


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    Deduction of TDS from Fixed Deposits does not absolve the calculation of Advance Tax and interest on non-deduction of advance tax

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April 2021