Tds

This query is : Resolved

Gaurav Tandon (Querist)
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20 April 2015 Client has deducted TDS for payment to interest to foreign bank.In Form 27Q instead of using 194LC and Deduction at 5% the consultant has selected the option of deduction at higher rate of 20 % and the return was filed with the excess 15 % being paid through an unconsumed challan available.

Because the Interest was net of taxes the bank does not care about the excess TDS deposited but the client has incurred a huge loss amounting to lacs.

Is there a way to revise the entries in which higher than pan is selected.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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20 April 2015 Revise the TDS return 27Q the excess TDS can be adjusted in future remittance.

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Gaurav Tandon

Gaurav Tandon (Querist)
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20 April 2015 Did not understand sir.The rate has been fixed at 20 %.It is not changing.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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27 July 2025 Here’s a clear explanation for your issue:

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### Situation Recap:

* TDS was **deducted at 20%** instead of the correct **5% under Section 194LC** (interest to foreign bank).
* Form 27Q was filed with this higher TDS.
* Excess TDS amount is sitting as an unconsumed challan.
* Client suffered a financial loss due to this excess deduction.
* You want to know if you can **revise the TDS return** or adjust the excess TDS.

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### Key Points:

1. **TDS Deduction Rate Fixed by Law**
The TDS rate under Section 194LC is fixed at 5%. If 20% was deducted by mistake, it is an **excess deduction**.

2. **Revision of TDS Return (Form 27Q):**

* **You can revise the TDS return** filed (within the prescribed time limit) to correct data mistakes, including wrong TDS rate selected.
* When revising, enter correct details and TDS amount.

3. **Adjustment of Excess TDS:**

* The excess amount paid can be shown as **unconsumed credit (challan balance)** in your TAN account.
* You can **adjust this excess TDS against future TDS payments** made under the same TAN.

4. **Refund from Income Tax Department:**

* Alternatively, the deductee (foreign bank) can claim refund of excess TDS from the Income Tax Department by filing the income tax return.
* The deductor cannot claim refund directly but can adjust the excess TDS against future TDS liabilities.

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### What you should do:

* **Revise the TDS Return (Form 27Q):**
Correct the TDS rate and amount to reflect 5% instead of 20%. This will update your TDS records and help in better reconciliation.

* **Use Unconsumed Challan:**
Keep the excess challan amount available for **adjusting against future TDS deposits**.

* **Advise the foreign bank:**
The foreign bank (deductee) should claim refund of excess TDS through their tax return filing.

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### Summary:

* Yes, you **can revise the return** to correct the rate.
* The excess TDS is **adjustable in future payments** via unconsumed challan.
* The foreign bank can claim refund of excess TDS from Income Tax Department.

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If you want, I can help you draft the revised TDS return entries or guide you through the process.

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