How to Claim a TDS Refund If Your Salary Is Below Rs. 12 Lakh

Your salary is below Rs. 12 lakh, your final tax works out to zero, but TDS still got cut from your pay or your bank interest. You get that money back by filing an income tax return (ITR) for the year and claiming the TDS as a refund.

Here is the key point: the refund does not land in your account by itself. The extra TDS sits as a credit under your PAN until you file, e-verify, and the Income Tax Department processes your return.

Key takeaways

• TDS is a credit under your PAN, not a lost amount. You claim it back by filing an ITR (as of July 2026).
• No refund is automatic. You must file and e-verify the return to start the process.
• Salary up to Rs. 12.75 lakh can still mean zero final tax after the standard deduction and rebate.
• Match your claimed TDS to Form 16, Form 26AS and AIS before you file, or the refund can stall.
• Pick the right ITR form. Capital gains or extra income can push you out of ITR-1.

New to filing? Keep PaisaSeed's Tax & ITR guides open while you read.

Why TDS gets deducted even when your tax is zero

Your employer does not read the "no tax up to Rs. 12 lakh" headline and stop TDS. Payroll runs on estimates.

It projects your annual salary, your chosen tax regime, declarations, bonus, arrears and previous-employer salary, then spreads the tax across the year.

Here is the catch: early in the year, if your declarations were incomplete or a bonus lifted the estimate, payroll can deduct more than you finally owe.

Banks do the same thing. If you did not submit Form 15G or 15H and your FD interest crossed the limit, the bank cut TDS too.

None of that deducted tax is gone. It is parked against your PAN, waiting for you to claim it.

What "salary below 12 lakh" actually means here

Quick question before the money math: which salary number are you using?

Your CTC, gross salary and taxable salary are three different figures. The refund runs on taxable income, not the amount that hits your bank each month.

For a salaried person, the Rs. 75,000 standard deduction lowers taxable salary first. So a Rs. 12.75 lakh salary can drop to Rs. 12 lakh taxable before anything else.

That is why people quote Rs. 12.75 lakh for salaried taxpayers.

But do not stop at salary. The PIB Budget 2025 release confirms the Rs. 12 lakh point excludes special-rate income such as capital gains. Sold shares, mutual funds or crypto? That income is taxed on its own track.

How the Rs. 12 lakh rebate creates your refund

For AY 2026-27, the Income Tax Department page for salaried individuals lists the new regime slabs for those below 60:

Tax is first computed on these slabs. Then the Section 87A rebate (up to Rs. 60,000 where taxable income does not exceed Rs. 12,00,000) can pull the final tax to zero under the new tax regime.

So here is the refund logic. If your final tax after rebate is zero but TDS of, say, Rs. 25,000 was already cut, that Rs. 25,000 is your refund once you file.

How to claim your TDS refund step by step

There is no separate "refund form". You claim the refund inside your ITR. Work through it in this order.

1. Download Form 16 from your employer for FY 2025-26.
2. Open AIS on the Income Tax e-filing portal and note every income and TDS entry.
3. Check Form 26AS so the TDS credit under your PAN matches Form 16 and AIS.
4. Log in to the e-filing portal and start the return for AY 2026-27.
5. Confirm the new regime, or opt out if the old regime suits you, so the rebate is applied correctly.
6. Compare the pre-filled data with your own figures, especially salary and TDS.
7. Add any missing income: bank interest, capital gains, second-job salary.
8. Pick the correct ITR form for your income mix.
9. Validate your bank account on the portal, because the refund is credited only to a pre-validated account.
10. File and e-verify within 30 days. An unverified return counts as not filed, and no refund is released.

If the document names confuse you, run through PaisaSeed's Form 16, AIS and Form 26AS checklist first.

The Income Tax Department's ITR-1 FAQ also asks taxpayers to download AIS and Form 26AS and check TDS, TCS and tax paid before filing.

Check these before you claim the refund

The refund stalls most often when the TDS you claim does not match what the department already sees.

So confirm all three line up:

• Form 16 from your employer
• Form 26AS for TDS credited under your PAN
• AIS for the income and TDS the department has on record

If a TDS entry is missing from Form 26AS, do not just claim it and hope. The Income Tax Department's TDS compliance FAQ says a deductee facing a TDS mismatch should tell the employer or deductor responsible for deducting the tax, so the TDS return can be corrected.

Fix the mismatch first. A clean match is what gets your refund moving.

Does salary below 12 lakh always mean a refund?

Not always. Salary below Rs. 12 lakh does not shield every other income you earned.

Watch out if you also have:

• capital gains from shares, mutual funds or property
• crypto or virtual digital asset income
• online gaming winnings
• freelance or professional income
• FD or savings interest above the basic limits
• salary from more than one employer
• foreign income or foreign assets
• ESOP perquisites
• rent from house property

Any of these can add taxable income. In some cases your final tax may be more than the TDS deducted, which means a balance to pay, not a refund.

Honest reality check: run the full calculation before you assume a refund is waiting.

Worked examples: what the refund looks like

Numbers make this concrete. Three common cases for salary below Rs. 12 lakh.

Example 1: Salary Rs. 10.80 lakh, TDS cut early in the year

Declarations were late, so payroll deducted Rs. 18,000 TDS in the first few months.

After the standard deduction, taxable income lands well inside the rebate zone, so final tax is zero. File the ITR, and the full Rs. 18,000 comes back as your refund.

Example 2: Salary Rs. 12.50 lakh, no other income

Taxable salary after the Rs. 75,000 deduction is about Rs. 11.75 lakh, inside the rebate limit.

If payroll deducted nothing and Form 16 shows zero TDS, there is no TDS to refund. Filing can still be worth it as a clean income record for loans or visas.

Example 3: Salary Rs. 11.80 lakh plus FD interest

Salary tax is nil, but the bank cut Rs. 4,000 TDS on FD interest because no Form 15G was submitted.

That interest is taxable income. If the total still stays within the rebate limit, the Rs. 4,000 TDS becomes your refund after filing.

Which ITR form to use when you claim

Use this as a starting point only. The e-filing portal and official instructions decide your final form.

The ITR-1 FAQ lists cases where ITR-1 cannot be used, including short-term capital gains, some long-term capital gains, more than two house properties, foreign assets, and total income above Rs. 50 lakh.

The wrong form can freeze your refund. If this is your sticking point, read PaisaSeed's guide on which ITR form a salaried person may need for AY 2026-27.

After you file: when the refund actually arrives

The refund is released only after the department processes your verified return and issues an intimation under Section 143(1).

Honest note: it is rarely instant. It usually reaches your pre-validated bank account some weeks after the return is processed.

If it drags, the usual culprits are a return still not e-verified, a bank account that is not validated, or a TDS mismatch. PaisaSeed's guide on what to check when your ITR refund is delayed for AY 2026-27 walks through the fixes.

Until then, the money is safe as a credit under your PAN. It does not lapse because you filed on time.

The 10-minute check before you file

Run this quick check before you submit the return:

• Does the salary figure in Form 16 match the ITR pre-filled data?
• Is your TDS visible in Form 26AS?
• Is AIS showing bank interest or other income you forgot?
• Did you change jobs during FY 2025-26?
• Did you receive bonus, arrears or a joining bonus?
• Did you sell shares, mutual funds, crypto or property?
• Are you sure about new regime vs old regime?
• Is your bank account pre-validated for the refund?
• Are PAN, address, email and mobile details correct?
• Did you e-verify after filing?

Answer these calmly and the refund claim becomes far less stressful.

Official pages to keep open

For this topic, keep these official pages handy (all live as of July 2026):

• Income Tax Department page for salaried individuals AY 2026-27
• Income Tax Department ITR-1 FAQ
• PIB Budget 2025 release on no income tax up to Rs. 12 lakh

Bottom line

If your salary is below Rs. 12 lakh and TDS was still deducted, that money is not lost. It is a credit sitting under your PAN.

You claim it back by filing an ITR for AY 2026-27, confirming the rebate applies, matching the TDS to Form 16, Form 26AS and AIS, choosing the right form, and e-verifying.

No filing, no refund. That is the whole game.

Before you decide to skip it, check one thing: is any tax already parked as TDS credit under your PAN? If yes, filing is how you get it home.

Disclaimer: This article is for general education only. It is not tax, legal or investment advice. Please check the latest Income Tax Department guidance or speak to a qualified tax professional for your personal situation.