Filing Form 16A

6 July 2011, Bangalore

I was working in an organisation for the last financial year (2010-2011) as an intern. They were paying me in the form of STIPEND.Every month they were deducting an amount of flat 10% of my stipend as tax. This deduction is done not according to tax laws. Here is the scenario.

Assume,  I was getting a stipend  of Rs 20,000/.I was paying Rs 2,000/- as tax and Rs 18,000/- to my bank account.
So annually,
Total stipend = Rs 2,40,000/-.
Tax deducted = Rs 24,000/-
The amount credited to my account = 2,16,000/-.
Here is the tax law (may not be accurate, I don't remember the slabs exactly).
If annual salary > 1,60,000 - no tax
if annual salary >1,60,000 and < 2,40,000 - 10 % tax.


So as per tax law, I was supposed to pay only (2,40,000-1,60,000)*.01 as tax. That is equivalent to Rs 8,000/-.
So I paid an extra amount of Rs 16,000/- as Tax.


For the last 3-4 weeks, I was asking lots of people whether I can reclaim this extra amount they deducted as tax. There were lots of opinions.

One of the old intern said, "I don't think we can file tax returns for stipends. When I asked one finance manager, he told me like that!"

CA guy, to whom I enquired, " Yeah, you can file this and claim the extra tax paid. But I need to prepare a balance sheet. I will show you once I complete the balance sheet. But, there is a chance that Income Tax people may came back and ask you explanation about the money I will be showing in the Balance Sheet. So you should be prepared for that".

This CA's opinion made me to think that, claiming back stipend is kind of illegal. So I was little bit demotivated. But I want to reconfirm it once again. I asked another auditor regarding this. 

He said "Yes, you can claim it and there is no need of any balance sheet or anything. Also its quite legal. Everything is in black and white."

His replay gave me more confidence. Meanwhile I posted my query in a forum, where many people told me its absolutely legal and go ahead and claim it. Here is the link to the forum.Thanks to all those guys who gave me an answer. 


Finally I filed for Tax Returns and I hope I will get refund. 

I am wondering what the first CA guy was telling. He told me he got 4-5 yrs experience in this field and filed 15-20 form 16A's earlier. Still he gave me wrong information. Was he trying to bluff me ?? and get more money as his fees?? . How much money he must have grabbed from other people like this??? I don't know...