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Pensioners and senior citizens in the lowest tax slab of 5 per cent were in for a shock when the tax deducted at source in the pension for April 2017 payable in May was deducted at 10 per cent. Since TDS is collected at source, these pensioners realised only later that the deduction was made at the earlier rate of 10 per cent and not as stated in the Union Budget proposal for assessment year 2018-19.
Now, many of them will have to file their tax returns to claim the credit.
“When the tax rate for individuals with annual income of up to Rs 5 lakh has been slashed to 5 per cent, the collection of extra tax will only leave us with less disposable income. That's not all. We now have to wait to file our tax return to claim the refund,” said one pensioner.
Many such seniors and pensioners park some funds in fixed deposits of banks. The monthly/ quarterly interest that such deposits fetch helps them tide over their expenses.
Should not companies (deductor) effect a correction in their software such that TDS collection is only 5 per cent for employees/ pensioners who fall in the lowest tax slab?
Some banks that BusinessLine spoke with seem not to have effected the change yet.
Incidentally, the TDS on interest on deposits deductible under Section 194A of the IT Act is also learnt to have been made at 10 per cent.
When this was brought to the notice of the concerned bank, the senior was informed that when the deductor (a bank) tried to deduct at a lesser rate than prescribed, the e-filing got rejected and they could not generate the TDS certificate, and the entry would not reflect in Form 26AS as well.
The pensioner was asked to file an application before the assessing officer under Section 197(1) of the IT Act, requesting TDS at a lesser rate than 10 per cent on all his deposits. “They will issue the certificate directly to us. By quoting the said certificate number, we can deduct the tax at a lesser rate,” the communication said.
Is this the way out when the rate itself has been halved? Should not banks carry out the necessary changes in their software instead of asking every pensioner to represent to the assessing officer? It appears that a lot needs to be done.
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