Income tax payment is often regarded as a liability of every taxpayer towards the economic development of their nation. The total funds received by this type of direct tax go into supporting infrastructural development and various other government programs.
But there are various steps involved to pay the income tax on time. From calculating the taxable income to making investments to get tax rebates under different heads, tax planning requires significant time and effort. If you have been filing income tax returns timely for a couple of years now, you might have received the acknowledgement of successful return filing afterward.
Ever wondered what will happen if you pay more taxes than what you are liable to pay? Surely, this can be the result of inaccurate tax calculations or advance tax payments based on self-assessment. This is where the concept of income tax refund comes into the picture. Let’s dive deeper into this concept.
What is an income tax refund?
Income tax refund refers to the amount refunded to a taxpayer in case his overall tax liability is less than the taxes he paid. In simple terms, it is the excess tax that the Income Tax Department refunds you after finding the difference between your tax liability and the total income tax you have paid.
For example, if you have already paid income tax of Rs. 20,000 based on incorrect tax calculation and later realized that the total tax liability turns out to be Rs. 15,000, you will receive Rs. 5,000 as an income tax refund. In general, these refunds are paid at the end of the tax year.
The provisions related to income tax refunds are noted under Section 237 to Section 245 of the Income Tax Act, 1961.
Who is eligible for the income tax refund?
Given below are instances in which you will be eligible for an income tax refund:
- When the advance tax you have paid based on self-assessment is higher than the actual tax payable
- When the tax charged based on regular tax assessment is reduced after resolving an error that occurred during the assessment process
- When the same income is taxed in a foreign country
- When you have investments that can offer tax benefits but you have not declared them earlier
- When, after considering the deductions allowed and taxes paid, the tax paid is negative
- If the TDS from salary, interest on debentures or securities, etc. is higher than the tax payable as calculated during regular assessment
Recommended Read: All About Tax Deducted At Source (TDS)
How to claim an income tax refund?
The simplest way to receive an income tax refund is to declare all your investments in Form 16 at the time of filing your income tax return. These include life insurance premiums you pay in Section 80C, house rent under Section 80 (GG), investments in equity mutual funds or NSC, bank FDs, and similar others.
If you fail to do so and think you have paid more tax that could be avoided, you need to fill out Form 30. This form is basically a request or application for the Income Tax Department to look into your case and process the excess tax that you have paid. Moreover, the income tax refund claim via this form must be submitted before the end of the financial year. It should also be accompanied by a return as defined under Section 139.
What is the due date to claim a tax refund on your income?
If eligible, you need to claim an income tax refund within one year from the date when the assessment year ends. Besides this, you should know that:
- The tax assessing officers do entertain refund claims in certain cases even when they were filed after the due date.
- Your income tax refund claim will not be considered after six successive assessment years have been completed.
- No interest will be paid to the refunds claimed later than the due date.
- The refund amount should be less than Rs. 50 lakh for one assessment year.
- The assessing officer may reconsider the delayed claims in case they require further verification.
How will you receive the payment of your income tax refund?
In most cases, the payment of the refund is processed via any of the following methods:
Direct transfer to your linked bank account
In this method, the amount to be refunded is transferred to your bank account via NECS/RTGS. As a taxpayer, it is important for you to ensure that all the details related to your bank account are furnished properly in the return forms while filing the tax return. This will enable the timely processing of refunds straight into your bank account.
Cheque-based refund payment
This is considered an alternative method for income tax refund payments. It is mostly utilized for cases in which the bank details provided by taxpayers are either unclear, wrong, or incomplete. Here, the tax authorities issue a cheque addressing the account number of the taxpayer as given at the time of filing the ITR.
How can you track income tax refunds?
Once you are eligible for a tax refund, you can track it by visiting income tax website or the NSDL-TIN website and clicking ‘Status of Income Tax Refunds’. You will get to know the current status of the refund process by entering your PAN and assessment year.
Similarly, you can track the refund cheque using the reference number and delivery service provider details given by the Income Tax department.
Will you get interest on a delayed income tax refund?
Section 244A of the Income Tax Act covers the provision of interest payment in case the refund payment is delayed. As defined under this Section, the Income Tax Department is liable to pay interest at the rate of 6% per annum. The interest accrued to the refund amount will be computed from the date when you paid the taxes to the date when the refund is processed.
For example, if you claimed an income tax refund of Rs. 20,000 for the assessment year 2018-19 and then received the refund in Mar 2019, then the applicable interest will be calculated from Apr 2018 to Mar 2018.
Is it possible to set off outstanding taxes against income tax refunds?
In some cases, taxpayers might have certain outstanding taxes against their name. If this happens to you while you want to claim an income tax refund, the tax authorities have the power to set off the refund amount against the outstanding tax payable. This is defined under Section 245 and will only happen after sending an intimation to you in writing to propose the said course of action.
Income tax refund FAQs
What will be the amount of refund that I will get back?
To get a better understanding of the income tax refund amount, you need to calculate the tax liability accurately. In case the amount you have paid as taxes is higher than the tax liability, you will get the extra amount refunded to you.
Will I get the excess paid tax refunded to me?
If you have paid more tax than what you are liable to pay, the excess amount will be refunded to you. To get the income tax refund, you need to file your income tax return first.
What is Form 26AS?
Form 26AS basically refers to the credit statement that contains comprehensive information about the taxes deducted from your income from various sources. You can pay the taxes in the form of Tax Deducted at Source (TDS), Tax Collected at Source (TCS), Advance Tax, or regular tax payment while filing ITR.
Do I need to submit investment proofs while filing the ITR?
You need not provide any documents or investment proofs while filing your returns. However, you need them all to carefully calculate the tax payable in every financial year.
Whom should I contact for my income tax refund-related queries?
In case you want to raise a query related to an income tax refund, you need to contact Aayakar Sampark Kendra using the following details:
Toll Free Number: 1800-180-1961 or email: refunds@incometaxindia.gov.in
