Credit for Tax Deducted at Source (TDS)
Introduction
Credit for tax deducted at source (TDS) is available to the person from whose income the tax has been deducted. However, credit is allowed only if the deductor deposits the tax with the Central Government.
Eligibility for TDS Credit
- General Rule
TDS credit is granted to the person whose income is subject to deduction, provided the tax is deposited with the government.
- Cash Withdrawals (Section 194N)
For tax deducted under Section 194N (cash withdrawals), credit is available to the person from whose account the deduction was made.
- Non-Monetary Perquisites
If an employer pays tax on perquisites provided to an employee, the employee is eligible for TDS credit.
- Income Taxable in Another Person’s Hands
When the deducted tax relates to income assessable in another person’s hands, the deductee must file a declaration with the deductor. If not, the other person can still claim credit while reporting the corresponding income in his ITR.
Timing of TDS Credit
- TDS credit is allowed in the assessment year in which the income is assessable.
- If the income is spread over multiple years, the credit is proportionately allocated.
- Exception: Tax deducted underSection 194Nis allowed in the year of deduction.
Verification of TDS Credit
- TDS, TCS, advance tax, and self-assessment tax details are available in the taxpayer’s Annual Information Statement (AIS) andForm 26AS.
- If TDS is missing, it may indicate that the deductor has either not deposited the tax or not filed the TDS statement.
- Obtaining a TDS certificate from the deductor helps resolve discrepancies.