Key Takeaways
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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.
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You become eligible for the income tax refund if you meet any of the following criteria:
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:
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.html 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:
If your refund has been processed but failed to reach your bank account due to incorrect account details, you can apply for a refund reissue via the e-filing portal.
Steps to apply for refund reissue:
Log in to eportal.incometax.gov.in
Go to ‘Services’ > ‘Refund Reissue’
Select the relevant Assessment Year and proceed
Update your correct bank account details (must be pre-validated)
Submit the request and wait for acknowledgment
Once the bank account is verified and the request is accepted, the refund will be reprocessed and credited to your account.
Filing your ITR after the due date may result in losing interest on the refund for the delay period.
Source: Tax2Win
Both income tax refund and tax credit adjustment deal with excess tax payments but function differently. Here’s a side-by-side comparison to clarify their distinctions:
Criteria | Tax Refund | Tax Credit Adjustment |
Definition | A refund is issued when excess tax has been paid. | Excess tax is adjusted against future tax liabilities or outstanding dues. |
When It Happens | When TDS, advance tax, or self-assessment tax exceeds actual tax liability. | When there are pending tax dues or when tax credits are carried forward. |
Refund Issued | Yes, refunded directly to the taxpayer’s bank account. | No, the excess tax is adjusted against future tax liabilities. |
Common Causes | Overpaid TDS, self-assessment tax, or advance tax. | Pending tax dues from previous years, carry-forward tax credits. |
Processing Time | Processed after ITR filing and verification by the Income Tax Department. | Adjusted automatically during tax assessment. |
Example | If your total tax liability is ₹40,000, but ₹50,000 was deducted as TDS, you get a tax refund of ₹10,000. | If you have an outstanding tax demand of ₹5,000 and are eligible for an income tax refund of ₹8,000, the department may adjust ₹5,000 and refund only ₹3,000. |
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Waiting for your tax refund can be frustrating, especially if it has been delayed beyond the expected timeline. There could be several reasons why your refund of tax is stuck, such as incorrect bank details, processing delays, or an issue with your income tax return. If you're facing this problem, here’s what you can do to resolve it.
If your tax refund is delayed and you suspect no issues on your end, the first step is to raise a complaint with the Income Tax Department. You can do this by following these steps:
Log in to the e-Filing portal – Visit the official Income Tax e-Filing website (www.incometax.gov.in) and log in using your credentials.
Navigate to the ‘Grievances’ section – Under the ‘Helpdesk’ or ‘Pending Actions’ tab, select ‘Submit Grievance.’
Choose the appropriate category – Select ‘Refund-related issues’ and specify the nature of your complaint, such as ‘Refund not received’ or ‘Refund delayed.’
Submit your grievance – Provide all necessary details and submit your complaint.
Track the status – You can check the progress of your complaint under the ‘Grievance Status’ section.
If your refund of tax was processed but the transaction failed due to incorrect bank details or other technical issues, you can request a refund reissue. Here’s how:
Log in to the e-Filing portal – Use your PAN and password to access your account.
Go to ‘My Account’ – Click on ‘Service Requests’ and select ‘New Request.’
Select ‘Refund Reissue’ – Choose ‘Refund Reissue’ as the request type.
Update your bank details – Provide the correct bank details, including IFSC code and account number.
Submit the request – After verification, submit the request and track the progress under ‘Service Request Status.’
Incorrect bank details are one of the most common reasons for a tax refund failure. If you realise that the bank details provided in your ITR were incorrect, you can correct them through the following steps:
Log in to the e-Filing portal.
Go to ‘Profile Settings’ – Click on ‘Pre-validate Bank Account’ under the profile section.
Add or modify your bank account – Enter the correct bank details and submit them for validation.
Re-apply for a refund reissue – Once your bank details are updated and validated, follow the refund reissue process mentioned above.
If you believe the refund amount is incorrect due to a miscalculation, missing deductions, or incorrect income reporting, you can address it in the following ways:
Revised Return: File a revised ITR under Section 139(5) if you discover an error in the original return. This must be done before the end of the relevant assessment year.
Rectification Request: If the error is from the department’s side, submit a Rectification Request under Section 154 through the e-filing portal.
Grievance Redressal: Use the ‘e-Nivaran’ feature on the e-filing website to raise a complaint if you're facing unresolved refund issues.
Be sure to retain all documentation and correspondence for reference in case your case requires escalation.
Claiming a full refund of income tax is a straightforward process if you ensure accuracy while filing your ITR and keep track of your refund status. By taking timely action, verifying your bank details, and following up with the Income Tax Department when necessary, you can avoid unnecessary delays and ensure that you receive your refund without hassle. Staying informed and proactive can make the entire process smooth and efficient.
First of all, your gross total income is taken into account and all applicable deductions/exemptions are deducted out of it, the resultant amount is the net income, upon which the Income Tax is calculated, on the basis of income tax slabs that are announced each year in the Union Budget.
How much tax you can save depends on your financial portfolio and profile. The most common avenue for tax-saving is Section 80C, which allows you deductions up to Rs 1.5 lakh in your taxable income. The implication is that you can save up to Rs 46,800*in taxes in a year, depending upon the income tax slab you belong to. Similarly, other avenues like interest on loans, health insurance etc also provide deductions capped at a certain amount.
*Tax saving of Rs.46,800/- is calculated at the highest tax slab of 31.2% (including 4% Cess) for an individual assessee on life insurance premium of Rs.1.5 lakh, who is having taxable income upto Rs.50 lakhs.
The best tax-saving investment would be an investment which offers the flexibility of investments, withdrawals and asset allocation as per your risk appetite. ULIPs, Guaranteed Saving Plans, ELSS, PPF, etc, are some of the best tax-saving options in India you can invest in.
If the interest earned or maturity value of your investment is tax-free you may not need to pay a tax on your investment. However, many tax-saving investments under section 80C do not offer tax exemption on accrued interest or maturity. Thus, you can choose the tax saving investments where accrued interest, partial withdrawals and maturity are tax-free.
You can choose investments that are tax-exempt: not an exhaustive list, but includes Equity Linked Saving Scheme (ELSS), Public Provident Fund (PPF), life insurance plans, Unit Linked Insurance Plans (ULIPs), Sukanya Samriddhi Yojana, Senior Citizens Savings Scheme (SCSS), National Pension Scheme (NPS), Bank Fixed Deposits.
You can claim almost any tax deduction under sections 80C and 80D without showing or submitting a receipt. However, you should keep the receipts safe until your income tax return has been accepted by the income tax department. In the case of other tax-saving deductions, you may need to show receipts and other documents with your ITR.
There is no limit to the number of tax-exempt investments one can have in a financial portfolio. However, it is important to note that there is a limit to how useful any instrument can be for the purpose. This is because the amount of deduction that can be claimed for specific instruments is capped at a maximum value. At the same time, keep your financial portfolio balanced so that it also provides safety, returns and liquidity.
The maximum limit of investment that will reap the benefits of deduction from taxable income under Section 80C is Rs 1.5 lakh.
Investing in a health insurance plan for family and parents, and investing an additional Rs 50,000 into an NPS Tier-I account are a few ways you can save tax beyond Rs 1.5 lakhs. Other tax-saving options include buying or constructing a house with a home loan. You can claim an additional deduction of up to Rs 2 lakhs on the interest paid for the loan.
Apart from Section 80C, various deductions and exemptions has been provided under the provision of Income Tax Act, 1961 like deduction under section 80D can be claimed for the payment of health insurance, deduction upto Rs 50,000 on home loan interest under Section 80EE. Any donations you make to charitable institutions are also allowed as deduction under Section 80G, subject to condition prescribed therein.
You can easily lower your tax on income by investing in tax-saving investment plans. A few great tax saving options are ULIP and life insurance plans, NPS tier-I account, PPF, Senior Citizen Saving Scheme, etc.
This way, you can reduce the amount of your taxable income. Besides, you can claim deductions on your taxable income on account of expenses such as repayment of home loan principal, child’s education fee, expenses during home purchase etc. You should start learning about tax-saving options in India. Tax-saving investments and expenses can reduce your total tax liability every year.
You can reduce your tax liability to zero if you utilise the common tax saving investments and sections such as section 80C, 80D, 80CCD and 24B deductions to the limits. Additionally, complete deduction requires you to claim both 24B and HRA simultaneously. This is only possible if you are paying both rent and home loan EMIs. If you are in this situation, your tax liability can go down to zero.
First of all, make investment of Rs 1.5 lakh in investments instruments covered under Sections 80C to reduce your taxable income. Claim deductions for the interests paid on home loan and/or education loan if any. Get a health insurance policy and claim for other medical expenditure like preventive medical healthcare check-up, expenditure on rehabilitation of handicapped dependent relative, among others. Mainly, the idea should be finding out which tax saving avenues fit well with your larger financial goals and invest in them!
FD interest or fixed deposit interest income gets taxed as per the income slab rates of individual taxpayer. Banks or post offices deduct tax or TDS when the aggregate interest income on all fixed deposits exceeds Rs 40,000 per financial year. The limit is Rs 50,000 in case of senior citizens.
First of all, make use of the Rs 1.5 lakh deduction allowed under Section 80C. This can be done by making investments in life insurance premium, Equity Linked Saving Scheme (ELSS), Public Provident Fund (PPF), Unit Linked Insurance Plans (ULIPs), Sukanya Samriddhi Yojana, Senior citizens Savings scheme, National Pension Scheme (NPS), among others.
Second, make use of the deductions available in respect of health insurance and other medical expenses. Under Section 80D of the Income Tax Act, 1961, a deduction of up to Rs 25,000 is allowed in a year in terms of the premium paid towards a health insurance policy of Self and your family i.e., Spouse and children. This can include preventive healthcare check-ups too upto Rs 5000/-. Under section 80D you can also claim additional deduction upto Rs. 25000/- (Rs. 50000 in case of senior Citizen) for health insurance of your parents.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
