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Income Tax Refund

All about Income Tax Refund

We often come across the term ‘tax refund’. Let’s understand what it means.

A tax refund or tax rebate is a refund furnished to the taxpayer when the tax liability is less than the taxes paid. Taxpayers can avail a tax refund on their income tax if the tax they owe is less than the sum of the total amount of the withholding taxes and estimated taxes that they paid, plus the refundable tax credits that they claim. Tax refunds are usually paid after the end of the tax year.

Refunds arise in those cases where the amount of tax paid by a person is greater than the amount which he/she is properly chargeable, as per the Income Tax and other Direct Tax laws. The same is noted under Sections 237 to 245 of the Income Tax Act, 1961.

Eligibility for Income Tax Refund

Following cases make you eligible for an income tax refund in India-

  • If the tax that you have paid on the basis of self-assessment, in advance, is greater than the tax payable on the basis of regular assessment.

  • If your tax deducted at source (TDS) from interest on securities or debentures, dividends, salary etc. is more than the tax payable based on regular assessment.

  • In case 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.

  • Based on regular assessments, if the tax charged is reduced due to an error in the assessment process was resolved.

  • After considering the taxes you’ve paid and the deductions you are allowed, if you find that that the tax payable is in the negative.

  • In case you have investments which offer tax benefits and deductions that you are yet to declare.

Steps to get Income Tax Refund in India

You are eligible to avail income tax refund once you file the return of your income. Usually, the date for filing income tax returns is July 31 of every year unless it is extended.

Income Tax amount that gets refunded

First, you must calculate the tax liability that is associated with you, to find the amount of income tax that you will get back as income tax refund. If the amount that you have paid in the form of taxes is more than the tax liability, then the extra amount will be refunded to your account.

Payment of tax refund

Generating a tax refund is a simple and seamless process. The payment is either done by cheque or is directly credited to your bank.

Claiming Income Tax Refund

The quickest and easiest method of filing your tax refund is to declare your investments in Form 16. Your investments may include life insurance premiums paid, house rent being paid, investments in equity/NSC/mutual funds, bank FDs, tuition fees, etc. While filing your IT return, submit all necessary and relevant proofs. In case you have failed to do so and have been paying extra taxes that you think you could have avoided, you will need to fill out Form 30.

Let’s understand what Form 30 is. Form 30 is basically a request that your case be looked into and analysed so that your excess tax paid be refunded. Your income tax refund claim should be submitted before the end of the financial year. Also, your claim needs to be accompanied by a return in the form, as prescribed under section 139.

Tracking Income Tax Refund

The IT department lets you track the status of your refund. You will receive a message notifying you, in case your refund procedure has not been completed yet by your officer in charge.

Refund by cheque:

The government also lets you track this with the speed post service that has been tasked with delivering it. You simply have to use the reference number that the IT department will give you.

Refund through Direct Transfer:

Excess tax paid can be refunded through online methods such as crediting it to your bank account with ECS transfer. RTGS / NECS are also commonly used to transfer the tax refund directly into a tax payer’s account using his/her 10 digit account number and MICR code only through the State Bank of India. A taxpayer can track his/her income tax refund via NSDL-TIN website by clicking on “Status of Tax Refunds” or through the income tax departmental website. He/she will need to enter PAN number and assessment year for getting the refund details.

Interest Payable on delay

A number of cases have been reported where the taxpayers have stated that they haven’t received their refund in due time. If this has happened to you too, don’t fret. You will receive an interest of 0.5% on your refund, for every month or the part of a month when the refund is delayed. Interest is calculated from the 1st of April of the assessment year. However, in case it is found that the reason for any duration of delay can be attributed to you, you will not be liable to receive any interest for that duration.

Setting-Off Outstanding Taxes against Refunds:

There may also be a case where you have a particular amount of outstanding taxes to pay. In this case, under Section 245, tax authorities have the power to set-off your refund amount against such outstanding taxes. Note that this can only happen after an intimation is sent to you in writing, proposing that this course of action will be followed by the authorities.

To summarise, income tax refund is nothing but getting back the difference between the actual amount of money you’ve paid on taxes vs. the amount of money you’re expected to pay to the government. In case you wish to save your hard earned money, you can declare your investments such as rent and other permissible deductions like mutual funds, NSC certificates, post office time deposit (POTD) certificates, stocks and equity investments, tuition fees of your children, home loan EMI , bank FDs or term deposits, etc. at the start of the assessment year. Hence, in order to make full use of tax benefits and save your hard earned income, it is imperative for a taxpayer to read up on the various tax-benefits and schemes made available to them.


When am I eligible for income tax refund?

When the amount of income tax paid is more than the income tax you are liable to pay, then as a taxpayer, you are eligible for an income tax refund.

How do I file my income tax refund?

The easiest and fastest way to file your tax refund is to declare your investments in Form 16. In order to file your tax refund, you can visit www.incometaxindiaefiling.gov.in and file your income tax refund.

How do I track my income tax refund?

There are 2 ways to track your income tax refund. One way is to use the reference number that the IT department will give you, if you’ve claimed it through cheque. If you have claimed it via direct transfer, then you can track the income tax refund via NSDL-TIN website by clicking on “Status of Tax Refunds” or through the income tax departmental website.

What are the ways in which tax refund is generated?

Generating a tax refund is an extremely simple procedure. The payment is either done by cheque or is directly credited to your bank.

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