Have you received lower amount of tax refund than what you had claimed while filing your income tax return (ITR) for FY 2020-21? If yes, then you are not alone; several tax return filers this year have had their bank accounts credited with lower tax refund amounts. This is because the new income tax portal has not considered/taken into account the full tax credit available in the Form 26AS for these tax return filers.
The reason stated by the income tax department in the intimation notice for giving less tax refund than claimed is: Form 26AS does not contain/contains partial amount of TDS with respect to the TAN mentioned in schedule TDS 1/TDS 2/TCS.
However, the TDS amount claimed by these ITR filers is equal to the amount showing in their respective Form 26AS. Form 26AS is itself downloaded from the income tax portal. It appears that data shown on one section of the portal is not in sync with/ not being taken into account fully by the processing software.
Abhishek Soni, CEO, Tax2win.in an ITR filing website says, “We have seen more than 10 cases where full TDS credit, as shown in Form 26AS, is not given by the income tax department at the time of processing of ITR. Due to this, individual taxpayers are getting less income tax refund than what is actually due to them.”
Tax experts and chartered accountants say that something like this happening is rare and does not normally happen during ITR filing season. Soni says, “However, this year there have been instances where at the time of filing income tax return the pre-filled data fetched on the new income tax portal shows mismatch in the TDS amount available against the PAN of an individual i.e., full TDS as reflecting in the Form 26AS is not fetched/pre-filled into the ITR. Even though the TDS amount is corrected at the time of filing ITR, it seems that income tax department is processing the ITR using pre-filled data rather than information reflecting in the Form 26AS.”
Mismatch reason in intimation notice
TDS amount available in Form 26AS
As can be seen from the screenshots above, according to the taxpayer’s Form 26AS, the total amount of TDS deposited against the PAN of the individual for FY 2020-21 is Rs 4532.31. This amount is the same as that claimed in the individual’s ITR form. However, the tax credit given by the income tax department while processing the ITR is Rs 2,246. The amount of TDS credit denied by the tax department is Rs 2,286, which is almost 50% of the TDS deposited against the PAN of the individual. The point here is that the TDS credit has been denied despite the fact that it is showing in the Form 26AS of the individual which should not normally happen. This is because Form 26AS is supposed be the TDS information available with the income tax department itself.
Here is a look at three examples of full refund amounts denied by the tax department and what taxpayers can do to rectify the situation.
CASE I: Income tax refund of Rs 2,286 is denied by the income tax department
Case II: Income tax refund of Rs 13,106 denied by the income tax department
Here, the taxpayer’s Form 26AS shows that the total TDS deposited against/credited to the PAN is Rs 20,365, however, TDS credit given by the income tax department (after processing ITR) in the intimation notice is Rs 7,259. Thus, tax credit of Rs 13,106 is denied by the income tax department which has led to lower tax refund.
Case III: Income tax refund of Rs 9,707 denied by the income tax department
Here, the total amount of TDS deposited against the PAN for FY 2020-21 is Rs 48,331, however, the amount of TDS credit given by income tax department is Rs 38,624. Thus, tax credit of Rs 9,707 is denied by the income tax department.
What can taxpayers do in such a situation?
“If the income tax refund issued to you is less than what claimed by you due to denial of TDS credit as shown in the Form 26AS, then in such a situation an individual will have to file rectification request under section 154 to claim the balance tax refund,” says Soni.
