An income tax refund happens when there is a mismatch between tax paid and your actual tax liability. You may realise that you have a tax refund at the time of filing your Income Tax Return (ITR). After you have filed your ITR and the income tax officer assessing the return finds it to be in the order he/she may approve your income tax refund.
This is usually seen as a bonus income, as TDS rates are far lower than the income tax slab rates.
An income tax refund is a state of reimbursement to a taxpayer when he pays a higher tax in the given financial year (FY) than your final assessed liability. Income tax refunds are possible when you have been paying the compulsory advance tax or have TDS deductions on your income.
At the time of filing an income tax return (or ITR), you can estimate the possible tax refund. The excess tax you have paid will be returned to you as a refund under Section 237 of the Income Tax Act, 1961. The income tax department will sanction the tax refund only after thorough verification of the income tax return filed.
The additional tax paid does not attract any interest. Thus, you can avoid paying excess tax and rather invest the money. You should estimate your possible tax liability for the year in advance and adjust your advance tax payments accordingly.
You become eligible for the income tax refund if you meet any of the following criteria:
a) Your total advance tax payments are more than 100% of your actual tax liabilities for the financial year
b) Your TDS payments in the financial year exceed your final tax liability after regular assessment
c) If you have made last moment tax-saving investments
d) You have paid tax on your income in a foreign country that has double taxation avoidance agreement (DTAA) with India
e) You have paid excess tax under regular assessment due to an error in assessment
The simplest way to claim your income tax refund is by filing a correct income tax return before the due date. While filing your return you can check the total advance tax payments under Form 26AS.
After you have filed your income tax return the assessment officer must be satisfied with the income tax calculation of the form. If your balance of advance tax payment under Form 26AS is more than your tax liability under the filed ITR, the officer may approve your tax refund.
Otherwise, you can also file Form 30 to request a review of your income tax payments against your liability. You can receive your income tax refunds faster if you provide your bank account details for direct transfer.
You can check the income tax refund status on your e-filing dashboard after filing and verifying the ITR.
You can claim an income tax refund within 12 months after the end of the relevant assessment year. However, the following conditions will also apply to the tax refund claims:
a) You can claim a tax refund on the income tax paid within six successive assessment years. CBDT will not accept tax refund claims older than this period.
b) CBDT does not pay any interest on the tax refunds
c) The officers may accept delayed tax refund claims if it requires verification
d) The total claim amount for one assessment year should not be more than Rs 50 lakh
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.
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.
You can file and track your ITR and income tax refund status at eportal.incometax.gov.in. If you do not have an account create your account on the website using your PAN and Aadhaar numbers. Log in to this portal and check your latest ITR status.
If your last ITR is not visible on the dashboard you can go to e-File on the menu, then Income Tax Returns and select ‘View Filed Returns’. This will show you all your historical ITRs and their status. If you have been filing returns in the offline mode, you will need to navigate through ‘View Filed Forms’.
If your last ITR has been processed and a tax refund has been issued you can check the status of the same here.
You can also check the status of the issued income tax refund through the TIN NSDL portal. Visit https://tin.tin.nsdl.com/oltas/refund-status-pan and enter your PAN and select the assessment year you want to check tax refund status for.
The portal will show you one of the following status messages:
a) Not determined if the assessing officer is yet to accept the refund
b) Refund Paid or Credited to Bank if the refund has been processed and paid
c) ITR Proceeds determined and sent to Refund Banker if the refund amount is yet to be transferred (cheque drawn)