Tds refund

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Ajay (Querist)
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12 December 2012 sir i've a query regarding tds refund below i give you an example pls explain me.

mr.X is a contractor he got a work contract for Rs.75000/- in a ABC company in the f.y 2011-12 and he got deducted Rs.750/- @1% as a tds.my question is while Mr.X claims for refund whether gets Rs.750/- whole amt as a refund or some other amt.why income tax department will refund the tds to give refund when why income tax department will collect tds.

Pls explain me about tds refund with an example at the earliest.Waiting for your answer.

Thanking you,
Subramanya

Pankaj Gupta

Pankaj Gupta (Expert)
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12 December 2012 Its an interesting query!!
First of all the reason that why he will get back the TDS previously deducted? Because his total income is below maximum exemption limit.

Now the reason that why Tds was deducted previously??
There are many reasons for this.
First can be that the department wants people to file return of income so it can collect maximum informations about the taxpayers.
Second can be to collect funds for the revenue. Because tds is deducted and paid in govt account during the year and refund is granted at a later stage. So deptt collects funds for short term.
Third reason can be that to avoid tax evasion. As tax is deducted at the time of payment of income, so deptt need not worry about the situation that the assessee pays the tax or not.