Rule 86B of GST rules

1. Income Tax paid by the company or firm is not considered. Only the Income Tax paid by the Director, Partner, or Proprietor is considered. 

2. Yes, TDS (Tax Deducted at Source) deducted and Advance Tax paid are considered as Income Tax paid.

 3. If TDS is considered as Income Tax, then yes, if the person has paid TDS more than ₹1 lac but claimed less in their

Thanks for the reply Sir.

Can you explain the 3rd query once again with some example. 

If TDS (Tax Deducted at Source) is considered as Income Tax, and the person has paid TDS more than ₹1 lac but claimed the whole TDS as Income Tax refund, then:

 1. The excess TDS paid (above ₹1 lac) will be treated as an overpayment of Income Tax.

2. The person may be eligible for a refund of the excess TDS paid. 

3. However, the refund will be subject to verification and approval by the Income Tax Department.

 4. The person may need to provide supporting documents and explanations for the excess TDS paid and claimed as a refund.

 5. If the refund is approved, it will be processed and credited to the person's account. It's important to note that TDS and Income Tax are two different things.

 TDS is a type of advance tax paid on behalf of the taxpayer, whereas Income Tax is the final tax liability of the taxpayer.

While TDS can be adjusted against Income Tax liability, it's essential to follow the correct procedures and report the correct information in the Income Tax return to avoid any issues or disputes. 

Dear Rama Cherry Sir,

I do have a query here, The TDS Deducted in my case was more than Rs. 3 Lakh but the Income Tax Liability was below 50 K. The Income Tax Department refunded me the balance amount in due course. In this case what will be the legal scenario :

Does the department will treat it irregularity under Rule 86B or they will approve my case based on the TDS Deducted and refunded on later stage.

I would be highly appriciable if yours goodself will reply my query with some case reference's.

Regards,

Good questions on Rule 86B. Here is clarification on each:

1. Income tax qualifier: Only the income tax paid by the Director, Partner, or Proprietor individually counts. The company or firm paying corporate income tax does NOT satisfy Rule 86B. The law is specific - it refers to the individual taxpayer behind the business, not the entity itself.

2. TDS and advance tax: Yes, both TDS (deducted from the director/partner/proprietor income) and advance tax paid by them qualify as income tax paid for Rule 86B purposes.

3. TDS claimed as refund: This is the important one. If TDS of Rs 1.5L is deducted but you file ITR claiming the entire amount back as refund, the net tax actually paid is nil. Rule 86B looks at actual tax paid, not gross deductions. The consensus interpretation is that the refund reduces the qualifying amount - so refunded TDS does NOT help you meet the Rs 1L threshold. Department view is that what ultimately settles as a liability, not what passes through the system, is what counts.

This [GST compliance checklist for new businesses](https://taxgarden.in/blog/gst-compliance-checklist-new-businesses) has a section on Rule 86B applicability and alternatives.