Taxpayers completing Q4 TDS returns (Form 24Q) and claiming standard deduction under section 16(ia) for Section 115BAC cases have encountered an error message. This error pertains to the applicability of the standard deduction under Section 16(ia) when opting for taxation under Section 115BAC.
Background
Tax Deducted at Source (TDS) is a fundamental component of Indian Taxation Law. It serves as an advance tax withholding mechanism wherein a portion of a person’s or organization’s earnings is retained by the government before the actual credit into the respective account. The Central Board of Direct Taxes (CBDT) oversees the regulation of TDS under the Income Tax Act of 1961.
The distinctive TDS Return forms are as follows:
- Form 24Q: For TDS on Salary
- Form 26Q: For TDS other than salary
- Form 27Q: For TDS on payments to NRIs and foreign companies (Section 195)
- Form 27EQ: For Tax collected at source (TCS)
Error Implications
The error message received by taxpayers raised a critical concern regarding the eligibility of claiming the standard deduction under Section 16(ia) for Section 115BAC cases when completing Q4 TDS returns using Form 24Q. It explicitly stated that selecting taxation under Section 115BAC renders the standard deduction under Section 16(ia) inapplicable.
Clarification and Expected Fix
In response to this issue, a clarification has been issued allowing taxpayers to claim the standard deduction under section 16(ia) for 115BAC cases as well, starting from the fiscal year 2023–24, in line with the department’s file format. The problem has been officially reported to the Income Tax department, and a resolution is anticipated in the upcoming FVU (File Validation Utility) version.
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