ITR Filing: Tax Deducted Under Wrong Regime? Here’s What You Should Do
As the income tax filing season for the financial year 2024-25 and assessment year 2025-26 is underway, taxpayers have begun gathering their essential documents and reviewing their financial details. For salaried individuals, one of the key steps is to inform their employer about their preferred tax regime at the beginning of the financial year.
This step allows employers to accurately deduct tax from an employee's salary throughout the financial year. For employees, the TDS deductions ensure hassle-free filing of the income tax return (ITR). The salaried taxpayers just need to match their Form 16 data for tax deductions and report it accurately while filing ITR.
However, choosing the incorrect tax regime can lead to excess tax being deducted by the employer. The salaried taxpayers can switch between the old and new tax regimes each financial year.
The old regime allows taxpayers to claim various exemptions and deductions. Meanwhile, the new regime offers lower tax rates but removes most exemptions. When choosing between these two systems, employees need to consider factors like their eligible deductions and salary structure, among other factors. For FY 2024-25 (AY 2025-26), the new tax regime is the default regime.
If the Tax Deducted at Source (TDS) on your salary is computed under the wrong regime, the Income Tax Department asks you to inform your employer. Employees should note that higher TDS can impact their take-home salary.
Typically, companies do not allow their employees to switch the tax regime in the middle of the financial year for the purpose of TDS on salary. However, an individual can choose any tax regime while filing their ITR, irrespective of their earlier selection at the beginning of the financial year for TDS deduction by the employer.
Salaried taxpayers can verify the Form 16 and the Form 26AS for all the TDS deductions and income details. Form 26AS is a consolidated annual information statement for a specific financial year. Through this, the details of your TDS, Tax Collected at Source (TCS), Advance Tax, Self-Assessment Tax and any income tax refund received during the year can be collected.
How To Claim Refund On Excess Tax Deducted Or Tax Deducted Under Wrong Regime:
1. Inform your employer immediately.
2. Ask them to file a revised TDS return with correct details.
3. To request the refund of excess TDS, taxpayers can also submit Form 26B while filing the ITR.
4. Form 26B can be filed using the TRACES website of the I-T Department: https://contents.tdscpc.gov.in/
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