THINGS TO KNOW ABOUT INCOME TAX REFUND, AND HOW TO CLAIM IT

In simple terms, “Refund” means “repayment of a sum of money”. Income tax department issues “Income Tax E-refund”, against the excess tax paid by a taxpayer. It is called “E-Refund” because it is directly paid into the bank account of the taxpayer by electronic mode. Income Tax refund arises in case of a mismatch between the tax amount paid and the actual payable amount. If the amount paid is higher than the actual amount payable, a refund is initiated. The Form 30 is used for the same purpose.

 

Under the income tax and other Direct Tax laws, tax refunds arise in those cases where the amount of tax paid by a person (or paid on his/her behalf) is greater than the amount on which he/she is properly chargeable. This is noted under Sections 237 to 245 of the Income Tax Act, 1961.

Who is eligible for Income Tax Refund?

There are many cases wherein you will be eligible for a refund. Some of them are:

  • If the tax you’ve paid in advance on the basis of self-assessment is more than the tax payable on the basis of regular assessment.
  • If your TDS from salary, interest on securities or debentures, dividends, etc. is higher than the tax payable on the basis of regular assessment.
  • If the tax charged, based on regular assessments, gets reduced because an error in the assessment process was resolved.
  • The same income is taxed in a foreign country (with which the government of India has an agreement to avoid double-taxation) and in India as well.
  • If you have investments which offer tax benefits and deductions that you have not declared.
  • If you find, after considering the taxes you’ve paid and the deductions you are allowed, that the tax paid amount is in the negative.

 

When can you claim income tax refund? 

In case, you have paid excess tax in the form of: 

(i) Advance tax or Self-assessment tax; 

(ii) TDS (Tax Deducted at Source) or TCS (Tax Collected at Source). 

*Firstly, the tax is calculated on the total income. Then taxes already paid in the form of advance tax, self-assessment tax, TDS or TCS are deducted from calculated tax. If the result is negative, it means you are eligible for refund because you have paid extra tax.

*You are required to satisfy the Income tax department that you are entitled to refund. 

*Refund claim is accepted by the Income tax department only after thorough verification of your claim. 

Calculation of tax refund- 

Gross Total Income*** 

Less: Deductions*** 

Taxable Total Income*** 

Calculate tax on the above income at applicable rate and subtract the taxes already paid.in the form of TDS/TCS, Advance tax, Self-assessment tax.  

 

                                   Tax calculated < Tax already paid = Refund

 

 

 

How to claim Income tax E-refund? 

1. File your Income-Tax return (ITR) electronically, in the relevant ITR form, on or before the due dates specified under the Income Tax Act, 1961. For this, you are required to login on the website. If you are not already registered, then register yourself as a new user.

2. If you have paid taxes more than the actual tax, which was required to pay, then the refund amount will be auto-calculated in ITR. Refund amount will be reflected in the return. 

3. After submitting ITR, verify it either electronically (e-verify through Aadhaar, OTP or EVC) or send the acknowledgement generated in Form ITR-V to “Centralized Processing Centre, Income Tax Department, Bengaluru 560500”, by ordinary post or speed post only, within 120 days from date of filing ITR electronically. The taxpayer should self-attest the form ITR-V before sending it for verification. 

4. The Income tax department processes ITR only after its verification. Therefore, it is better to either e-verify your return or send Form ITR-V (for verification) to the Income tax department as soon as possible after filing ITR. Faster processing of ITR will lead to faster processing of refund. 

5. For getting refund in your bank account directly, you are required to provide your bank account details in then income tax refund filed electronically. The details include bank name, IFSC of bank and bank account number of the taxpayer who wants to claim income tax e-refund. 

6. After processing the ITR and satisfying itself regarding the authenticity of claim, IT department issues the refund.

7. You will receive a message and an e-mail from the Income tax department once your refund is approved, on your registered mobile number and your registered e-mail address, respectively. 

NOTE: Many people have come across fraudulent refund messages, which resemble the messages sent by the Income tax department. They ask for personal details and bank account related details. Therefore, it is advisable to verify the sender details before sharing any of your details with them. 

Here is the screenshot of the alert that flashes on the income tax India e-filing website on visiting it: 

https://www.legalwiz.in/wp-content/uploads/image-53.png

You need to be very cautious before attending such kind of messages. 

8. Normally, you will receive the refund in a few months. However, if you want to check the refund status online, then you can do it by visiting: 

(i) NSDL website

  • Write down your PAN (Permanent Account Number),
  • Select the Assessment Year for which you want to know the refund status,
  • Enter the Captcha Code provided therein and click on Proceed.

You will get details regarding the status of your refund. 

– If the Status shows “Refund credited to your bank account”, it means refund amount has been credited in your bank account. 

– If the Status shows “Refund had expired”, it means refund amount has not been presented for payment within the validity period of 90 days. You can raise Refund re-issue request through income tax e-filing portal (https://www.incometaxindiaefiling.gov.in) 

– If the Status shows “Refund had returned”, it means refund amount had been returned due to wrong bank account details. You can raise Refund re-issue request through income tax e-filing portal (https://www.incometaxindiaefiling.gov.in) 

– If the Status shows “Refund had been adjusted against outstanding demand of previous year”, it means refund for the current year has been adjusted against, outstanding tax demand of previous assessment year, either in part or in full. You can make an enquiry regarding the adjustment made through income tax e-filing portal (https://www.incometaxindiaefiling.gov.in) 

(ii) Income tax e-filing portal

  • Write down your PAN (Permanent Account Number),
  • Write down the Acknowledgement no. of ITR,
  • Enter the Captcha Code provided therein and click on Submit.

You will get details regarding the status of your refund. 

 

9. You can claim income tax e-refund by raising request only during the time period prescribed under the Income Tax Act, 1961. The time limit, which is prescribed, is Within 1 year from the last day of the assessment year. In some cases, the relevant departmental authorities can consider delay in refund request if they find it suitable. 

Refund in case of Appeal

If the refund arises to a taxpayer because of an order passed in an Appeal or any other proceedings under the Income Tax Act, 1961, then there is no need to raise request for refund. That person will be eligible for the refund amount. 

If refund in not received in due time from Income Tax Department (Interest in case of Delayed Refund):

If IT Department does not refund the amount after a certain period, then you are entitled to get:

1. If refund is arising because of Tax deducted at source (TDS) or Tax collected at source (TCS) or tax paid by way of Advance tax, then – Interest @ 0.5% for every month or part of the month. 

Period- From 1st April of the relevant Assessment year to the date of granting refund [if ITR is filed on or before the due date specified under the Act] 

Period- From the date of filing ITR to the date of granting refund [if ITR is not filed on or before due date specified under the Act] 

2. If refund is arising out of tax paid by way of Self- Assessment tax, then – Interest @ 0.5% for every month or part of the month. 

Period- From the date of filing ITR or payment of tax (whichever is later), to the date of granting a refund. 

3. Refund in any other caseInterest @ 0.5% for every month or part of the month. 

Period- From the date of payment of tax/ penalty specified in the notice of demand to the date of granting a refund. 

4. If refund is arising out of appeal Interest @ 3% per annum. 

Period- From date, following the expiry of the time allowed for a refund (3 months from the end of the month in which the Commissioner of Income Tax receives such order) to the date of granting a refund. 

* Where the Income Tax Department is of the view that granting refund can adversely affect the revenue, it can withhold refund. In addition, no interest is payable if the refund amount is less than 10% of the tax determined.

How is the payment of income tax refund made?

The payment of income tax refund is made in one of the following methods:

  1. Direct transfer of the amount to be refunded to the taxpayer’s bank account: This is the usual method which is used for the purpose of transferring the income tax refund amount to the taxpayers. The transaction might be made through NECS/RTGS. It is important on the part of the taxpayer to make sure that all the details pertaining to his/her bank account are properly furnished in the return forms at the time of filing the returns. This enables the easy and fast movement of funds directly to the account.
  2. Income Tax Refund via cheque: This method is an alternative option for transferring the Income Tax refunds. In the case of the bank details provided by the taxpayer at the time of filing the Income Tax Returns (ITRs) is not unclear, incomplete, or wrong, the Income Tax authorities issue a cheque addressing the account number which is furnished by the taxpayer at the time of filing his/her returns.

 

Due Date to Claim Income Tax Refund

Income tax refunds must be claimed within one year from the date on which the assessment year ends. However, in certain cases, assessing officers tend to entertain refund claims that were filed after the specified due date. Here are some points you need to keep in mind:

  • Income tax refund claims will not be considered if six successive assessment years have been completed.
  • The refund amount must be less than Rs.50 lakh for a single assessment year.
  • Interest will not be offered on refund of late claims.
  • If the delayed claims require verification, the assessing officer could reconsider the claim.

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