What is an Income Tax Refund?

Income Tax Refund is applicable for those cases where the amount of tax paid by a person is greater than the amount which is chargeable. This is noted under Sections 237 to Section 245 of the Income Tax Act, 1961. Refunds, if any, are automatically processed. You should ideally receive your refund within eight months from the date of e-filing your return. The taxpayer can track the income tax refund status on Income Tax e-filing website or NSDL-TIN.

Eligibility for an Income Tax refund

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

  • If the taxpayer has paid more tax as self-assessment but he is liable to pay less tax.
  • When the TDS deducted from salary, rent, interest on securities, commission, etc. is more than the tax which should be paid at the time of annual filing.
  • Tax charged under regular assessments decreases because of an error in the assessment process which was later resolved.
  • The same income is taxed in a foreign country and in India as well.
  • If an individual has invested in a business which offers tax benefits and deductions that have not declared.
  • If the tax paid amount is in the negative.

Process of tax refund

  • Filing the return on time is the first and foremost requirement for claiming the Tax refund, by providing the adequate income and tax payment details.
  • File your return online is advisable so that it is processed faster and it doesn’t have to go through the bureaucracy.
  • Check your Income Tax Return status and ITR V acknowledgment to see if it’s reflecting the tax refund correctly.
  • Your Tax Return is thereafter processed and an intimation u/s 143(1) is sent to you for the same.
  • The Income Tax department will send the refund by post (cheque) or credit to your bank account.
  • Taxpayer should provide all the details like IFSC Code, Account Number, and Address of tax refund

Modes to receive refunds

  • Electronic clearing system (ECS); – Provide your bank account details in the ITR.
  • Cheque or demand draft – Submit your address and contact details in the ITR.

When you log in on the department website you can get the filing status of your income tax return like:

  • No e-filing has been done for this assessment year – It implies that you haven’t filed the return for that particular assessment year.
  • Not determined – It means that either the taxpayer hasn’t shared the ITR V with the Central Processing Centre (CPC) Office or the Income Tax Department has not received it. In this case, resend your copy of ITR V or e-verify your return.
  • No demand, No refund – It means that the taxpayer hasn’t paid any excess tax to the income tax department but if you think that you have then you can file for a rectification by submitting all the documents like Form 16 and other proofs.
  • Contact with your jurisdictional assessing officer– It means that CPC has processed the return, and a claim has been raised. This could be because the department has initiated assessment proceedings under Section 143 or there is a clarification due to which it cannot be processed by the CPC Office, Bengaluru. 
  • Refund paid– It means that your refund has paid but if you still haven’t received the refund amount, check all the details like PAN No., Account number, and other bank details or raise a request for Refund Reissue.

Claim Income Tax Refund through Direct Transfer

Direct transfer

In the direct transfer mode, you can receive the refund of the excess tax paid through a credit in your bank account with an ECS transfer. RTGS / NECS are also used to transfer the tax refund directly into your account, using your 10 digit account number and MICR code, through the State Bank of India.

Refund by cheque

You can track this with the speed post service that has been tasked with delivering it, using the reference number that you can find on the NSDL-TIN Refund Status.

Key points

Interest Payable on Delay in Refunds

There have been many cases reported that taxpayers do not get their refund in due time. You are entitled to receive an interest of 0.5% (on your refund) for every month or part of a month comprised in the following period.

  • Return filed before Due Date

From 1st April of the assessment year to the date on which the refund is granted.

  • Return is filed after Due Date

From the date of furnishing of return of income to the date on which the refund is granted.

Setting-Off Outstanding Taxes against Refunds

In this case, it may also happen that the taxpayer has some previous outstanding taxes to pay. So the authorities will set-off your refund amount against the outstanding taxes and issue an intimation u/s 245.

Conclusion

Income Tax Refund is the difference between the actual amount of money you have paid and the amount of money you’re liable to pay. It is beneficial for the taxpayer to save hard earned money by declaring all the investments and deductions of mutual funds, equity investments, and term deposits, etc.

For any help on ITR Filing feel free to consult the tax experts at LegalRaasta. You can file ITR yourself via our ITR software or get CA’s help on filing income tax return. You can also use the option of Business ReturnBulk Return or Revised Return Filing.