What is an Income Tax Refund?
Under the income tax and other Direct Tax laws, 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.
Am I eligible for an 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 tax deducted at source (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.
How can I get IT refund in India?
When you file the return of your income, you can avail tax refund. In general, the date for filing income tax returns is July 31 of every year unless extended.
What is the Income Tax amount that I will get back?
In order to find the amount of income tax that you will get back as the refund, you must calculate the tax liability that is associated with you. If the amount that you have paid as taxes is more than the tax liability, then you will get the extra amount as a refund.
How is the payment for tax refund done?
The payment is either made by cheque or it is directly credited to your bank.
How can I claim my Income Tax refund?
The easiest way to file for your tax refund is to declare your investments in Form 16 (life insurance premiums paid, house rent being paid, investments in equity/NSC/mutual funds, bank FDs, tuition fees, etc.) while filing your IT return and submit the necessary proofs. If you’ve failed to do so and have been paying extra taxes you think you could have avoided, you will need to fill out Form 30.
Form 30 is basically a request for your case to be looked into and the excess tax that you have paid is refunded. Your income tax refund claim needs to be submitted before the end of the financial year. Your claim needs to be accompanied by a return in the form (prescribed under section 139).
How is Income Tax refund processed?
The Income Tax authorities who are present at the Centralised Processing Centre (CPC) in Bengaluru are responsible for processing the Income Tax (IT) refund. The refunds are processed once the assessee files his/her Income Tax Returns (ITR). If any tax reimbursement arises at the time of processing the ITRs, the IT refund banker receives the orders for refund of income tax which are generated and transferred by the IT authorities.
How is the payment of income tax refund made?
The payment of income tax refund is made in one of the following methods:
- 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.
- 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.
The Form 30 format is as follows: (Sample)
I, (your name), of (address), do hereby state that my total income computed in accordance with the provisions of the Income Tax Act, 1961, during the year ending on (year) being the previous year for the assessment year commencing on the 1st of April (year), amounted to Rs. (amount); that the total income tax chargeable in respect of such total income is Rs. (amount) and that the total amount of Income Tax paid or treated as paid under:
Section 199, is Rs. (amount).
I, therefore, request for a refund of Rs. (amount).
I hereby declare that I was resident/resident but not ordinarily resident/non-resident during the previous year relevant to the assessment year to which this claim relates and that what is stated in this application is correct.
(Signature)It is important to note that:
- This claim should contain a document of proof of return of income in a prescribed form, unless you’ve already made such a claim to the Assessing Officer.
- Non-residents whose income is subject to TDS should make the claim for refund to the “Assessing Officer, Non-resident Refund Circle, Bombay”.
If you have been charged tax under the provisions of Section 192 – 194, Section 194A and Section 195 on your income (for dividends, etc.), the claim should be accompanied by the necessary certificates recommended under Section 203.
How do I track my Income Tax Refund?
The IT department allows you to track the status of your refund. If your refund procedure has not been completed by your officer in charge, you will receive a message notifying you of the same.
Just follow these two steps to claim income tax refund.
- Get Refund through Direct Transfer: Excess tax paid can be refunded to you by crediting your bank account with 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. You can track your income tax refund through the income tax departmental website or through NSDL-TIN website by clicking on “Status of Tax Refunds”. You will then need to enter your PAN number and assessment year for refund details.
- Refund by cheque: You can track this with the speed post service that has been tasked with delivering it, using the reference number that the IT department will give you.
Interest Payable on Delay in Refunds
There have been many cases reported that taxpayers do not get their refund in due time. Don’t panic, because you will receive an interest of 0.5% (on your refund) for every month or part of a month that the refund is delayed. The interest calculation commences from the 1st of April of the assessment year. However, if it is found that the reason for any duration of the delay is attributable to you, you will not receive any interest for that duration.
Setting-Off Outstanding Taxes against Refunds:
The case may also arise that you have some outstanding taxes to pay. Tax authorities have the power (under Section 245) to set-off your refund amount against such outstanding taxes. However, this can only happen after an intimation in writing is sent to you, proposing that this is the course of action that will be followed.
Income Tax Refund is basically the difference between the actual amount of money you’ve paid on taxes Vs. the amount of money you’re expected (liable) to pay. You can save a lot of hard-earned money by just declaring your investments and rent (if any) 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. It is important to read up on the various tax-benefits and schemes made available to you and make full use of them to make sure your hard earned money stays in your pocket.