Meet Mrs. Sharma – The FY25 Example
Mrs. Sharma, a retired teacher, has a mix of investments:
Rs 8,000 dividend from Company A – no TDS.
Rs 12,000 dividend from Company B – TDS applies.
Rs 9,000 dividend + Rs 15,000 buyback from Company C – combined, over Rs 10,000, so TDS applies.
Rs 11,000 interest from a corporate bond – TDS applies.
Rs 40,000 from a REIT: 70 per cent rental income (TDS applies) and 30 per cent dividend (TDS applies).
By the year-end, her TDS is more than her final tax bill—so she’ll claim a refund.
Avoid These Common TDS Pitfalls
TDS is only part of your tax bill – If your tax bill is bigger than TDS collected, you must pay the difference, possibly as quarterly advance tax.
Reconcile income and TDS records – Match dividends, interest, and other receipts with your AIS, TIS, and Form 26AS to ensure correct reporting and credit.
Report gross income, not net – Since payouts hit your account after TDS, adding only the net figure in your return may lead to under-reporting. Always “gross up” by including the TDS amount.
Use Form 15G/15H where eligible – Individuals and HUFs with annual income below the basic exemption limit can file these forms with the deductor to avoid or reduce TDS.
Joint holdings – TDS is deducted in the name of the first holder in the demat or bank records. If joint holders plan tax positions individually, this can cause mismatches in 26AS and AIS.
PAN errors and incomplete KYC – Even a minor mismatch in PAN or name spelling can lead to higher deduction at 20 per cent and delay in credit/refund.
Special categories like minors or estates – If shares are held in the name of a minor, the TDS credit may appear under his PAN. Filing returns correctly to claim it under the guardian is critical.
Confusing “nil” TDS with tax exemption – A nil TDS doesn’t necessarily mean the income is tax-free. You may still need to pay tax while filing your return.