TDS stands for Tax Deducted at Source, which is a concept introduced to collect tax from the very source of income. As per this concept, a person who is liable to make payment of specified nature to any other person 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.

TDS recovery refers to the process of claiming a refund of the excess TDS paid by the taxpayer. A TDS refund arises when the taxes paid by way of TDS are greater than the actual tax payable calculated for the Financial Year. For example, if a taxpayer belongs to the 5% tax bracket and has an FD that earns an interest income, banks levy a basic 10% TDS on the interest accumulated. The taxpayer can claim a TDS refund for the additional amount deducted. Similarly, a taxpayer can also claim a TDS refund of excess TDS deducted on salary due to non-submission of 80C investment proofs or rent receipts towards house rent allowance to the employer.

If the IT department is late in paying the TDS refund as applicable, then they must pay the amount with a simple interest of 6%. However, if the TDS refund amount is less than 10% of the income tax payable, the IT Department will not pay this interest. The TDS refund process is straightforward, and taxpayers can visit the income tax portal and log in to download the relevant form for an income tax refund.