In India, getting a full refund of income tax is only possible when the tax is deducted at the source, or you have paid advance tax, and the refunded amount is below the taxable limit. To ensure that you receive the full refund of income tax, you must plan your taxes correctly and e-file the income tax return (ITR) on time. Let us look at the different aspects of Income Tax Refund and how you can claim a maximum refund.
What is Income Tax Refund?
The Income Tax Depertment returns any excess tax paid by an assesse (or taxpayer) as an income tax refund during a given financial year (FY). Income tax refunds are possible only when the taxpayers contribute more income tax than their actual tax liability. At the time of filing an income tax return (or ITR), taxpayers can claim the excess tax paid as a refund under Section 237 of the Income Tax Act, 1961. The income tax refund is sanctioned by the department only after thorough verification of the income tax return filed.
Filing an Income Tax Refund Claim
Earlier, you need to fill out the Income Tax Form 30 to claim an income tax refund. With the advent of e-transfer, however, you can claim your income tax refund by merely filing your Income Tax Return (ITR) online. Furthermore, the ITR must be verified within 120 days of filing (either electronically or physically.) It is important to note here that the excess income tax paid for which you are filing a refund must reflect in your Form 26AS. Once the Income Tax Department verifies your refund claim as valid, the refund will be credicted to your bank account.
Time Limit for Submitting an Income Tax Refund Claim
The process of claiming an income tax refund depends upon the filing of ITR, the expected time limit for claiming a refund is the same. For a given assessment year (AY), the period for filing ITR and claiming an income tax refund is by the of that assessment year. For example, for the assessment year 2020-21, the last date to claim a tax refund will be 31st March 2021, which is also the last date for delayed ITR filing for FY 2019-20.
Income Tax Refund in Special Cases
In case a person is unable to claim an income tax refund due to insolvency, death, liquidation, incapacity, or any other cause, their legal representative, guardian, receiver, or trustee can file for an income tax refund on their behalf, under Section 238 of the Income Tax Act, 1961.
Interest Earned on Income Tax Refund
The Income Tax Department mandatorily pays an interest if the refund amount is equal to or above 10% of the total tax paid under Section 244A of the Income Tax Act. Accordingly, simple interest of 0.5% per month is levied on the amount of tax refund and paid to you.