If your Indian corporate clients deduct 10% TDS under Section 194J from every invoice, you do not have to lose that money. When your actual tax liability is lower than the tax deducted, you are entitled to a 100% refund deposited directly into your bank account with interest.
1. Why Domestic Clients Deduct 10% TDS (Section 194J)
Under Section 194J of the Income Tax Act, any business paying fees for professional or technical services exceeding ₹30,000 in a financial year must deduct 10% TDS (or 2% for certain technical services/call centres).
2. How TDS Refund Actually Works with Section 44ADA
Assume a developer earns ₹10,00,000 from Indian clients. Clients deduct ₹1,00,000 (10% TDS) and deposit it with the government against your PAN card.
When you file your ITR using Section 44ADA:
- Taxable Income (50% deemed profit) = ₹5,00,000.
- Under the New Tax Regime (Section 87A rebate), total income tax on ₹5,00,000 = ₹0 (NIL)!
- Since your tax liability is ₹0 and clients deducted ₹1,00,000, the entire ₹1,00,000 is refunded to you!
3. Verifying Form 26AS and AIS (Annual Information Statement)
Before filing your ITR, log into eportal.incometax.gov.in:
- Navigate to e-File > Income Tax Returns > View Form 26AS.
- Confirm that all clients have deposited the TDS and their TAN matches.
- Check the AIS (Annual Information Statement) tab to confirm reported gross receipts match your invoices.
4. Step-by-Step Claim in ITR-4
In Schedule TDS of ITR-4, the portal auto-populates your TDS credits from Form 26AS. Ensure your bank account is validated and pre-authorized for refund credit in your portal profile.
5. Refund Processing Timeline & Section 244A Interest
Once your return is e-verified with Aadhaar OTP, CPC Bengaluru processes the return within 2 to 4 weeks. Under Section 244A, the Income Tax Department pays 0.5% simple interest per month (6% per annum) on your refund amount calculated from April 1st of the assessment year!