Mistakenly Paid 5% TDS Instead of 2%? Here's How to Claim a Refund via TRACES

Introduction

In the financial year (FY) 2024-25, a change in the applicable TDS rate on rent under Section 194-IB created confusion among many tenants and property managers. Specifically, if rent payments after October 1, 2024, are subject to a reduced TDS rate of 2% instead of 5%, but you mistakenly deducted or deposited tax at the higher rate, you may be eligible for a refund of the excess amount. Fortunately, the TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal allows deductors to initiate and track such refund requests efficiently.

This step-by-step guide walks you through the complete process of claiming a refund for excess TDS deducted on rent via Form 26QC on the TRACES portal, ensuring compliance and timely recovery of overpaid taxes.

Steps for claiming a refund of TDS on TRACES portal

Step 1: Access the TRACES Portal. Begin by visiting the official TRACES website at https://www.tdscpc.gov.in. Log in using your PAN credentials (as the deductor/tenant). Once logged in, your account's home or landing page will be displayed.

Step 2: Navigate to the Refund Request Option. From the menu on the portal, go to the "Statements / Forms" section. Under this tab, select the option "Request for Refund (For Forms 26QC)" to start the refund process.

Step 3: Review the Checklist Before Proceeding. Before moving forward, the system will present you with a checklist outlining the conditions and requirements for submitting a refund request. Carefully read through this checklist and confirm your understanding by clicking on "Proceed".

Step 4: Specify the Reason for Requesting Refund. The portal will ask you to indicate the reason why you are claiming a refund. Choose at least one of the valid reasons provided on the screen (such as excess TDS deducted due to incorrect rate selection). After selecting the reason, click on the "Add Challan" button to proceed to the next step.

Step 5: Enter the Challan Information. You will now be required to provide the details of the challan (payment reference) against which the refund is being requested. Make sure to input accurate information about the challan where the excess TDS was deposited.

Step 6: Verify Challan Consumption Details. After entering the challan data, the portal will display the challan consumption summary, showing how much of the payment has been utilized and the balance amount eligible for a refund. Review this carefully, and then agree to the system's declaration by selecting "I agree", and click "Proceed" to move forward.

Step 7: Provide Bank Account Information. Next, enter your bank account details where the refund amount should be credited. Ensure that the bank account is valid, active, and matches the deductor's registered information. Once the bank details are filled, click "Proceed".

Step 8: Complete Verification Step. The portal will display a verification screen summarizing the refund request. Check all the entered details for accuracy. If everything is correct, click "Proceed" to continue.

Step 9: Confirm and Submit Refund Request. At the confirmation page, you will find the "Submit Refund Request" button. Click on it to officially submit your request for processing.

Step 10: Authenticate the Refund Request. Once you submit the refund request, the system will prompt you to validate the request using either your Digital Signature Certificate (DSC) or Aadhaar-based authentication (OTP verification). After successful authentication, a confirmation message will appear on the screen. You can then click on "Preview and Print Form 26B Acknowledgement" to download and print the acknowledgement receipt of your refund request.

Step 11: Track the Refund Status. Go to "Track Refund Request (For Forms 26QB/26QC/26QD)" under the same "Statements / Forms" section. You can search the refund status using:

• Search Option 1 (by request number)
• Search Option 2 (by challan details), OR
• Simply View All to see all your refund requests.
• Remarks/status will indicate whether the refund is under process, approved, or rejected.

Important Tips Before Filing

• Double-check challan details and bank account information to avoid delays.
• Make sure your DSC is registered and active if you are opting for DSC-based validation.
• Keep a copy of the Form 26B acknowledgement safely for future reference.

Conclusion

Mistakenly deducting excess TDS on rent is not uncommon-especially when rate changes are implemented mid-year. Thankfully, the TRACES portal offers a streamlined refund mechanism through Form 26QC. By following the steps outlined above, you can efficiently request a refund, authenticate it, and track its status in real time.

Always ensure the accuracy of your challan details, deductor information, and bank account to avoid unnecessary delays. Whether you used 5% instead of 2% due to oversight or misinterpretation of updated provisions, filing your refund claim promptly helps you stay compliant and recover excess tax smoothly.