Income Tax Refund

An income tax refund is sanctioned when a taxpayer pays more duties than their actual liability. It can be issued against different types of direct taxes, like self-assessment tax, Tax Deducted at Source, foreign tax credit, advance tax, etc.

IT refund is calculated after filing an income tax return. If a taxpayer is eligible to get a refund, he or she is informed of the same via an SMS or email. It contains the total amount of refund credited to one’s account, along with a refund sequence number, in accordance with Section 143(1) of the Income Tax Act, 1961. 

The fund is credited either directly to the taxpayer’s account via RTGS or NEFT or is sent via cheque or demand draft to the registered address.

When to Claim IT Refund?

Refund is issued under several circumstances; for example, if a taxpayer has a fixed deposit and earns interest on the capital, financial institutions will levy a 10% TDS on the said interest. If that taxpayer belongs to the 5% tax slab, then he or she can claim a refund (of 5%) on the additional deducted amount.

State income tax refund can also be claimed (in case of Tax Deducted at Source) if a taxpayer fails to submit Form 80C against investments like ELSS. These Mutual Funds allow a taxpayer to claim tax benefits of up to Rs. 1.5 Lakh in an assessment year.

IT refund can also be claimed against failure to submit Form 80C against house rent allowance, medical expenses towards self or dependents, etc.

Who is Eligible for Income Tax Refund?

You may be eligible for a refund in a variety of circumstances. Among them are-

• If the Tax paid in advance under self-assessment is greater than the Tax payable under the conventional assessment.
• If your TDS from salary, interest on securities or debentures, dividends, or other sources exceeds the Tax payable on a regular basis.
• If the Tax charged on a regular basis is decreased because an error in the assessment process was corrected.
• The same income is taxed in both a foreign country (with which the Indian government has an agreement to avoid double taxation) and in India.
• If you have unreported investments that provide tax benefits and deductions.
• If, after examining the taxes you've paid and the deductions you're allowed, you discover that the Tax paid amount is negative.

One can also claim an income tax refund in case his or her employer deducts more than the payable income tax.

In case an individual has to claim an online income tax refund on savings instruments like fixed deposits.

If the taxpayer is above the age of 60 and has an FD account, they can earn tax exemption on the interest earned (up to Rs. 50,000) from that fixed deposit.

Due Date to Claim Income Tax Refund

An individual can claim the income tax refund within 12 months after the assessment year's end. Note the below-mentioned conditions will also apply to the tax refund claims:

• An individual can claim an ITR refund on the income tax paid within 6 sequential assessment years. It is important to note that the Central Board of Direct Taxes (CBDT) will not accept income tax refund claims older than this period.
• A delayed tax refund claim can be accepted after verification.
• The total claim amount for a specific one assessment year should not exceed Rs 50 lakh.

Online Income Tax Refund Claim

A taxpayer can claim the refund within the assessment year that he or she has filed their IT returns. In accordance with the Income Tax Act 1961, taxpayers will have to file their return within the 31st July of an assessment year to claim the refund.

Applying for an IT refund requires filling up the income tax refund form, as well as submitting necessary documents like utility forms and pre-filled ITR. The fulfilled forms can be downloaded from the official website.

How to Check Income Tax Refund Status 

There are two different methods to track the ITR Refund Status – via the income tax e-filing website or on the TIN NSDL website.

• Check ITR Refund Status via Official e-filing Website

Here is a step-by-step process to check the status of IT refund.

1. The taxpayer will have to log in to his or her account. 
2. Navigate to the section ‘View Returns/Forms’ and select ‘Income Tax Returns’ from the drop-down menu. Select the assessment year that they want to check the refund status.
3. They will be given an acknowledgement number, which will redirect them to a page showing when the income tax return was filed and verified, when it was processed, status, mode of payment, etc.

• Via the TIN NSDL Website

The status of an online income tax refund can also be checked on the TIN NSDL website.

1. Navigate to the official TIN NSDL website.
2. Provide PAN details.
3. Select the assessment year for the refund status.

State income tax refund is liable to accumulate interest if the total sum is more than 10% of the tax paid. According to Section 244A, interest is paid at a rate of 0.5% per month on the refund amount. It is calculated from the 1st of April of each assessment year till the date of disbursement of the refund.

Interest on Delayed Income Tax Refund

If the income tax refund is delayed, then the Income Tax Department stands liable to pay interest at the rate of 6%.

Note the calculation of the interest applicable to your refund amount will be done from the date on which the income tax was paid to the IT Department to the date on which the tax refund was made.

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