Income Tax Return (ITR) filing: Provident fund TDS costs you this much; 5 easy steps to claim it

Income Tax Return (ITR) filing: Nobody likes to give up or share the gains on their hard-earned investment with the taxman, however, it is obligatory for the taxpayer to do, else the Income Tax Department will track you down and force you to pay up. From penalties to jail time, all is threatened to be slapped on the recalcitrant people. So, every salaried employee must pay a tax rate on their income and income from other sources to central government. This is decided on the type of income and gains made. Interestingly, an employee does not receive the entire decided salary from the employer, as they involve deduction of benefits like provident fund, allowances, etc. But did you know, when you leave your job and finally decide to avail your provident fund, then your gains (on interest) are taxable. Yes, tax is deducted at source (TDS) on your provident fund gains. 

According to section 192A, payment of accumulated balance of provident fund which is taxable in the hands of an employee. A TDS of 10% is deducted from your provident fund. 

This how the section goes: 

Notwithstanding anything contained in this Act, the trustees of the Employees' Provident Fund Scheme, 1952, framed under section 5 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) or any person authorised under the scheme to make payment of accumulated balance due to employees, shall, in a case where the accumulated balance due to an employee participating in a recognised provident fund is includible in his total income owing to the provisions of rule 8 of Part A of the Fourth Schedule not being applicable, at the time of payment of the accumulated balance due to the employee, deduct income-tax thereon at the rate of ten per cent :

Provided that no deduction under this section shall be made where the amount of such payment or, as the case may be, the aggregate amount of such payment to the payee is less than [fifty] thousand rupees:

Provided further that any person entitled to receive any amount on which tax is deductible under this section shall furnish his Permanent Account Number to the person responsible for deducting such tax, failing which tax shall be deducted at the maximum marginal rate.

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However, income tax payers need not worry, as once the TDS is deducted, you can file for returns. Here's how!

Step 1 - The data structure (file format) in which the e-TDS return is to be prepared has been notified in https://www.tin-nsdl.com/services/etds-etcs/etds-rpu.html

Step 2 - e-TDS return in accordance with the file formats is to be prepared in clean text ASCII format with 'txt' as filename extension. e-TDS return can be prepared using Return Preparation Utility provided by NSDL or any other third party software.

Step 3 - Once the file has been prepared as per the file format, it should be verified using the File Validation Utility (FVU) provided by NSDL

Step 4 - In case file has any errors the FVU will give a report of the errors. Rectify the errors and verify the file again through the FVU.

Step 5 - Generated .fvu file can be submitted at TIN-FC or uploaded at http://incometaxindiaefiling.gov.in/ website

Keep a note that, online upload of TDS/TCS Statement, registration of organisation at www.incometaxindiaefiling.gov.in is mandatory 

WHat is TDS! 

The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. 

The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.