Section 200A of ITA, 1961 : Section 200A: Processing Of Statements Of Tax Deducted At Source

Explanation using Example

Imagine a small business owner, Mr. Sharma, who has hired a few freelancers to work on a project. As per the Income-tax Act, Mr. Sharma is required to deduct tax at source (TDS) before making payments to the freelancers. After deducting the appropriate TDS, he files a quarterly statement of tax deduction at source (TDS return) to the Income Tax Department, as mandated by section 200 of the Income-tax Act, 1961.

Upon filing the TDS return, the Income Tax Department processes the statement as per Section 200A. During this processing, they notice that Mr. Sharma made a mathematical error while calculating the TDS amount. The department corrects this arithmetical error and recalculates the TDS liability. They also check for any incorrect claims Mr. Sharma might have made, such as deducting TDS at a lower rate than what is prescribed by the law.

After adjustments, the department computes any interest that Mr. Sharma might owe due to the underpayment of TDS because of the error. Additionally, if Mr. Sharma filed his TDS return late, he would be liable to pay a fee as per section 234E, which is also calculated by the department.

Considering all these adjustments, the department determines whether Mr. Sharma has to pay any additional tax, interest, or fees, or if he is eligible for a refund because he paid more than what was due. An intimation is then sent to Mr. Sharma with the details of the final amount payable or refundable.

If Mr. Sharma is due a refund, it will be granted to him, provided that the intimation is sent within one year from the end of the financial year in which the TDS return was filed. In Mr. Sharma's case, if he filed the return for the financial year 2022-23, he should receive the intimation by the end of the financial year 2023-24.