Why Is TDS Deducted Even Though My Income Is Below the Taxable Limit?

One thing I'd recommend is checking your Form 26AS and Annual Information Statement (AIS) before filing.

I initially thought my bank had deducted too much TDS, but after downloading Form 26AS, I found that all the deductions had been correctly reported. Once I entered those details in my ITR, the refund calculation happened automatically.

If there's a mismatch between your TDS certificate and Form 26AS, it's worth resolving that first because it can affect the refund amount.

My case involved rental income instead of bank interest.

The tenant deducted TDS before paying my monthly rent because that's what the law required. When I calculated my total income at the end of the financial year, my actual tax liability was much lower than the TDS already deducted.

After filing my Income Tax Return and completing e-verification, I received the balance as a refund. From my experience, TDS is like an advance tax payment—it doesn't always mean you actually owe that much tax.

I had exactly the same situation last year.

I'm based in Canada, and my NRO bank deducted TDS on fixed deposit interest even though my total taxable income in India was below the exemption limit. My chartered accountant explained that banks often deduct TDS based on the applicable TDS provisions without considering your overall tax liability.

I filed my ITR, reported all my income, and the excess TDS was refunded directly to my bank account after my return was processed. It took a few weeks, but everything worked out.