Stox N Tax

TDS Refund on Excess Payment: How to Claim from TRACES [2025 Guide]

Table of Contents

  1. Introduction
  2. When Is a TDS Refund Applicable?
  3. Step-by-Step Process to Claim TDS Refund from TRACES
  4. Important Notes for Deductors
  5. FAQs on TDS Refund Claim by Deductor
  6. Conclusion

Introduction

Tax Deducted at Source (TDS) is a mechanism through which tax is collected at the point of income generation. It helps streamline tax collection and ensures early inflow of revenue to the government.

However, there are situations where excess TDS is inadvertently deposited. This could be due to clerical errors, incorrect PANs, wrong section codes, or duplicate entries. Fortunately, the deductor (payer) can claim a TDS refund through a semi-manual process involving the TRACES portal and the jurisdictional Assessing Officer (AO).

This guide explains when you’re eligible for a refund, how to claim it, and how to follow up, with all necessary precautions and documents.

When Is a TDS Refund Applicable?

You can claim a refund as a deductor under the following circumstances:

  • Duplicate payment of TDS for the same transaction.
  • Incorrect section code or wrong PAN used while depositing TDS.
  • TDS deducted and paid in excess of the actual tax liability.
  • TDS paid on income that is not taxable (e.g., exempt payments).
  • Errors in challan details like wrong amount or date in the TDS return.
  • Payment mismatch even after filing a correction statement.

✅ Note: Only the deductor (not the deductee) can apply for such refunds.

Step-by-Step Process to Claim TDS Refund from TRACES

Though TRACES doesn’t offer a direct online refund application, the portal helps with validation and challan tracking. Here’s how you can proceed:

Step 1: Check Challan Status on TRACES

  • Visit https://www.tdscpc.gov.in
  • Login with your TAN credentials.
  • Navigate to:
    Statements / Payments > Challan Status
  • Identify any Overbooked, Unmatched, or Excess Paid challans.

These challans indicate that the deposited amount hasn’t been utilized or matched with deductee records.

Step 2: File Correction Statement (If Required)

If the issue is due to an error in:

  • Section Code
  • PAN of deductee
  • Challan amount

Then:

  • Use RPU/FVU utility or TDS return preparation software to file a correction statement.
  • Wait for TRACES to update challan utilization status after correction.

Step 3: Prepare Refund Request Letter

Draft a formal letter to the jurisdictional AO. Include:

  • TAN, PAN, and Name of Deductor
  • Assessment Year concerned
  • Challan details: BSR code, Challan Serial Number, Date, Amount
  • Reason for excess payment or refund claim
  • Bank details (account number, IFSC, branch, etc.)
  • Signed declaration

Step 4: Attach Supporting Documents

Enclose the following:

  • Copy of TDS challans showing excess payment
  • Copy of TDS returns filed
  • Challan status report from TRACES
  • Form 26AS showing unmatched/excess amount
  • Cancelled cheque of the deductor’s account

Step 5: Submit to Jurisdictional AO

  • Submit the refund application along with documents to your AO either:
    • Physically, or
    • Via email (if your AO accepts e-submissions)
  • AO contact details can be obtained from the income tax portal.

Step 6: Follow-Up and Refund Processing

  • AO verifies your claim and cross-checks with TRACES data.
  • Once approved, refund is processed by the CPC and credited to the deductor’s bank account.

Important Notes for Deductors

  • ❌ No online refund filing is available for excess TDS; submission is manual to the AO.
  • ✅ Adjustment is preferable: If the excess challan is valid and not time-barred, adjust it in future TDS returns before opting for a refund.
  • 🕒 Refund process may take 2–6 months, depending on the AO’s verification.
  • 🧾 Keep acknowledgment of submission for follow-up.
  • 💸 No interest is paid on these refunds under the Income-tax Act.

FAQs on TDS Refund Claim by Deductor

Q1. Can the deductee claim refund on excess TDS paid by the deductor?
A: No, only the deductor can apply for a refund in case of excess or duplicate TDS payment.

Q2. Is interest paid on TDS refund claimed by the deductor?
A: No, the Income-tax Act does not provide for interest on refunds of excess TDS paid by the deductor.

Q3. How long does it take to receive the refund?
A: It typically takes 2 to 6 months, depending on the Assessing Officer’s internal processing time.

Q4. Can the overpaid challan be adjusted in the next quarter?
A: Yes, if the challan is marked “overbooked” or “unmatched” and validated by TRACES, it can be adjusted against future TDS liability.

Q5. How to find the Assessing Officer’s (AO) details?
A:
Login to https://www.incometax.gov.in
Go to: My Profile > Jurisdiction Details

Conclusion

Excess TDS payments are common due to operational or clerical errors. However, claiming a refund is possible if you follow the correct process. Regular reconciliation of Form 26AS, challans, and TDS returns can prevent such situations. Deductors should act promptly, maintain records, and coordinate with their jurisdictional AO to ensure the refund is processed without delays.

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