TDS deducted on interest portion of accidental claim.

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Ram manohar (Querist)

27 October 2020 On a motor vehicle accident claim of Rs.45 lakhs, interest amount of Rs.16 lakhs received for the period, and the insurance company deducted Rs.317134 on the interest portion and gave Form-16A on 20.2.2020. There are many judgments both by High Courts and Supreme Court that TDS should not be deducted on interest received in case of motor accident claims. Since the amount of Rs.317134 has already been sent to Income Tax department, how to claim this as refund while filing the return. The income of the client is well within the tax limits and no tax payable since savings are made. She is a retired teacher with a pension income of Rs.300000 per annum. Pl enlighten regarding how to claim refund of this tax deducted of Rs.317134. thanks.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

28 October 2020 Provisions for tax deduction at source (TDS) on interest on motor accident claims stipulates that no TDS is to be deducted on interest accumulated up to a sum of Rs.50,000 during one year. This provision directly implies that if interest earned is more than Rs.50,000, TDS is applicable in such cases.
File ITR and claim refund of TDS if it's a capital receipt.

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