An income tax refund is issued when a taxpayer overpays their taxes beyond their actual liability. This refund can apply to various types of direct taxes, such as self-assessment tax, Tax Deducted at Source, advance tax, foreign tax credit, etc.
An income tax refund is determined after the submission of an income tax return. If a taxpayer qualifies for a refund, they are notified through SMS or email. This notification includes the refund amount credited to the individual's account, along with a unique refund sequence number, as outlined under Section 143(1) of the Income Tax Act, 1961.
The refund is either transferred directly to the taxpayer’s account via RTGS or NEFT, or it may be sent via cheque or demand draft to the registered address.
To understand more about income tax refunds, the process for claiming them, and how to check the income tax refund status, keep reading until the end.
When Can You Claim an IT Refund?
Refunds are granted in various cases; for example, if a taxpayer has a fixed deposit earning interest, the financial institution will deduct 10% TDS on the interest income. If the taxpayer is in the 5% tax bracket, they can claim a refund for the excess tax deducted.
State income tax refunds can be claimed if a taxpayer does not submit Form 80C for investments like ELSS Mutual Funds. These funds offer tax benefits of up to Rs. 1.5 Lakh per assessment year.
Income tax refunds can also be claimed if Form 80C is not submitted for claims like house rent allowance, medical expenses for self or dependents, and similar deductions.
Who Qualifies for an Income Tax Refund?
A variety of scenarios make one eligible for a refund, such as:
- If the advance tax paid under self-assessment exceeds the tax liability determined under regular assessment.
- If the TDS deducted on salary, interest, dividends, or other income sources exceeds the tax payable.
- If a mistake in the assessment process reduces the tax charged on a regular basis.
- If the same income is taxed both in India and in a foreign country with which India has a Double Taxation Avoidance Agreement (DTAA).
- If you have investments that offer tax benefits and deductions that were not previously reported.
- If, after reviewing the taxes paid and the available deductions, you find the amount of tax paid is negative.
You can also claim an income tax refund if your employer deducts more income tax than necessary.
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Situation |
Claim Process |
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If the deducted tax is not equal to the stated tax liability |
The taxpayer can file an income tax return to initiate the refund process. They must provide their bank's name and IFSC code to enable the IT Department to refund the excess tax paid. |
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If the individual does not have taxable income |
They can apply for a lower (zero if income is below Rs. 2.5 Lakh/year) Tax Deducted at Source certificate by filling out Form 13, which can be issued by the jurisdictional Income Tax Office under Section 197. |
To claim an online income tax refund on savings instruments like fixed deposits:
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Situation |
Claim Process |
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If the taxpayer does not have taxable income |
They must submit Form 15G as a declaration within the assessment year, informing the authorities that no taxable income is earned. The taxpayer must also not have TDS deducted on their interest income. |
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If the bank deducts income tax despite submitting Form 15G |
The taxpayer will need to file an income tax return to claim the refund. |
Taxpayers above the age of 60 can claim tax exemption on interest earned from fixed deposits (up to Rs. 50,000) without paying tax on the same.
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Situation |
Claim Process |
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If the taxpayer does not have taxable income for the entire year (even after claiming tax deductions up to Rs. 50,000 on interest income) |
They must submit Form 15H to their financial institution, informing them of the lack of taxable income. |
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If financial institutions deduct income tax on interest income |
The taxpayer can claim a refund by filing an income tax return. |
Deadline for Claiming Income Tax Refund
An individual can request an income tax refund within 12 months following the end of the assessment year. The following conditions apply when claiming a tax refund:
- 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.
- Delayed refund claims may be accepted after proper verification.
- The refund claim amount for a particular assessment year cannot exceed Rs 50 lakh.
Online Process for Claiming Income Tax Refund
A taxpayer is eligible to claim a refund within the assessment year in which they have filed their IT returns. As per the Income Tax Act 1961, taxpayers must file their returns by July 31st of the respective assessment year to be eligible for a refund.
To apply for a tax refund, taxpayers must complete the income tax refund form and submit necessary documents like utility forms and pre-filled ITR. These forms are available for download from the official website.
How to Check the Status of Income Tax Refund
Taxpayers can check the status of their income tax refund using two methods: via the e-filing website or the TIN NSDL website.
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Check Income Tax Refund Status through the Official e-filing Website
Follow these steps to check the income tax refund status:
- Log in to your account.
- Go to the ‘e-File’ section. Under ‘Income Tax Returns’, select ‘View Filed Returns’ from the drop-down menu. Choose the relevant assessment year to view the refund status.
- You will receive an acknowledgment number, which will direct you to a page showing the filing and verification dates, refund status, payment method, etc.
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Using the TIN NSDL Website
You can also check your refund status on the TIN NSDL website.
- Visit the official TIN NSDL website.
- Enter your PAN details.
- Select the assessment year to check the refund status.
State income tax refund may accrue interest if it exceeds 10% of the tax paid. As per Section 244A, interest is calculated at a rate of 0.5% per month on the refund amount, starting from April 1st of the assessment year until the refund is issued.
Interest on Delayed Income Tax Refund
If there is a delay in processing the income tax refund, the Income Tax Department is obligated to pay interest at a rate of 6% per annum.
The interest is calculated from the date the income tax was paid to the department until the refund is issued.
Understanding the income tax refund status helps ensure the timely receipt of refunds for overpaid taxes. Whether through direct transfer or cheque issuance, tracking your refund process guarantees transparency and efficiency. Stay proactive to manage your tax refunds effectively.