Income Tax Department returns any excess tax that has been paid by an assessee. This happens when the actual tax liability is less than the amount of tax paid. As per Section 237 of the Income Tax Act, 1961, assessees can claim a refund for tax amount paid in excess. Refund orders are issued by Income Tax Department only after the thorough verification of facts and circumstances.
In case an assessee fails to furnish all investment proofs on time, the organization in that case deducts taxes on basis of the proof of investments submitted even if the actual investment is higher. In situations like these, the amount that is paid in excess can be claimed back from the government and is known as the Income tax refund. The Income Tax department also gives you facility to adjust your tax refund amount against tax dues that are outstanding, under Section 254 of the IT Act.
Eligibility Criteria for Income Tax Refund
Below are cases for which you are eligible to claim income tax refund:
- If taxes paid by you on the basis of self-assessment are more than what you are liable to pay
- If Tax Deducted at Source (TDS) by your employer or by your bank is more than what you are liable to pay as per your regular assessment.
- If your tax liability for the financial year is ₹ 25,000 and the TDS deducted by your employer is ₹ 30,000, you can claim a refund of ₹ 5000 (30,000 – 25,000) for extra amount of tax deducted.
- When you fail to declare the details of tax-saving investments on time, you can claim tax refund on declaring the investments after providing the proofs to the income tax department.
- Double Taxation- There are few countries with which Indian government has Double Taxation Avoidance Agreement. For an instance, let’s assume you are a non-resident Indian working in foreign country (with which India has double taxation agreement). You hold an NRO (non-resident ordinary) deposit in an Indian bank and interests on such fixed deposits shall be taxed as per the applicable slab rate.
Banks deduct the tax at source before crediting the interest into your account. Now, if you qualify to be tax resident of foreign country where you reside, you may claim for refund of TDS deducted on interests earned in India on your NRO deposit.
Time Limit for claiming Income Tax Refund
TDS refund needs to be claimed within a year from the last date of the assessment year. However, only for some cases, assessing officers are allowed to consider the refund claims that are filed beyond the prescribed time limit.
Following terms and conditions are to be kept in mind:
- In case there is scrutiny of delayed claims of refund that needs to be reconsidered by assessing officer
- No interest will be allowed to pay on refund of belated claims
- No income tax refund claims are to be entertained after the completion of 6 consecutive assessment years.
- The refund amount should not exceed Rs.50 lakh or more for one assessment year.
How to Claim Income Tax Refund
Claiming an income tax refund is not a difficult process. Here are few steps to follow for getting income tax refund
- File your Income Tax Return
- File your income tax return online at the official website http://incometaxindiaefiling.gov.in/
- You get an acknowledgement number for filing the return online with your digital signature.
- You can also physically sign the ITR-V form generated online and submit it to Income tax processing centre within specified timeline (within 120 days of return filing).
- Usually, due date for income tax return filing is July 31stevery year unless extended by the Income Tax Department.
- Hold back till the Refund is processed
- After filing the ITR, the Income Tax Department will scrutinize and process the refund, if any.
- Refund claims are processed through State Bank of India.
- Mode of payment of refund is based on the details furnished by you in income tax return file.
- It can be through ECS (electronic clearing system) or through demand draft or cheque.
- If you choose to get the refund credit through ECS, it’s essential to provide all the necessary details such as bank account number, bank branch and IFSC code correctly in the income tax return file.
- If you choose to receive the refund through demand draft or cheque, it will be sent to your communication address mentioned in the ITR file.
- Usually, it takes about 3-6 months to get the refund from the date of e-filing the ITR.
- It may even take longer time if returns are filled physically.
- In case your tax return record says you have paid in excess, then the extra amount paid has to be claimed as refund separately.
- It’s important to ensure this excess tax paid is reflecting in your Tax credit statement form 26AS to get the tax refund.
Check Income Tax Refund Status Online
In case you do not receive refund within 6 months, log on to the NSDL website (https://tin.tin.nsdl.com/oltas/refundstatuslogin.html). Fill in your PAN and other details to check income tax refund status.
- If the status says- ‘refund had expired’ –
- Request for reissuance of refund by logging into e-filing portal.
- In case return was filed physically, then contact your income tax assessing officer.
- If the Status says – ‘refund had returned’–
- The refund payment cheque or demand draft sent to communication address has been returned undelivered or the bank account details provided for ECS are incorrect.
- In such cases, you should contact your assessing officer to get the refund reissued.
- In case of e-filing, place a request for reissuance of refund in your e-filing account.
- If the status says – ‘refund paid’–
- This could be a delay from processing banks end.
Check your account number, IFSC code and other bank details are correctly mentioned. Check with concerned department of SBI for further guidance.
- If the status says – ‘no demand no refund’
- Your IT return is processed, but income tax department has found (after scrutiny of facts and circumstances) that there was no extra tax paid.
- In such cases you can file for rectification by submitting all the proofs of investment along with the Form 16.
Another way of claiming a refund is filling up the Form 30. Form 30 is a refund request form that needs to be submitted to the Income Tax Department. This request letter talks about the tax amount paid by you which is more than the actual tax liability for the particular assessment year.
Form 30 needs to be submitted by the end of the financial year. You need to also enclose the investment proofs and other documents to justify the refund claim. Below is the sample format of Form 30:
Income Tax Refund in Special Cases
- Under Section 238 of the Income Tax Act, 1961, if a person or his legal representative is unable to claim tax refund due to death, insolvency, incapacity, liquidation or due to any other cause, he/she is entitled to claim such refund for the benefit of such person or his estate.
- Under the provision of this section, if any person’s income is clubbed with any other person’s income, in such cases only the latter alone shall be entitled to receive the income tax refund for such income.
Income Tax Refund on Appeal
As per Section 240 of the Income Tax Act, 1961, if there is any refund request as a result of any order of appeal by the assessing authority, there is no requirement to place a request of refund claim from assesses side
In case the assessment is cancelled and there was a direction to make fresh assessment, the refund shall become due only after making the fresh assessment.
Interest on delayed Income Tax Refund
- Under the provisions of Section 244A of the Income Tax Act, 1961, if there is any delay in payment of refund, the interest at the rate of 6% p.a. will be payable by the Income Tax Department.
- Interest on refund amount is calculated from the date of payment of tax to the date of actual payment of refund.
- For instance, if a person claims for a refund of ₹ 5,000 for the assessment year 2016-17 and the refund was paid to you in the month of March 2017, the interest on refund will be calculated from April 2016 to March 2017.
- It is important to note that the interest is payable only if the amount of tax refund due is more than 10% of the tax payable by you.
- The interest amount for the period attributable on the part of assessees will not be paid by the Income Tax Department if the delay is found to be from the side of assessees.
Setting- off Income Tax Refund against Outstanding Tax Dues
Under the provisions of Section 245 of the Income Tax Act, 1961, assessing officers are given a power to set-off or adjust the income tax refund claimed against any tax dues which is outstanding from the assesses/ taxpayer.
The IT department sends intimation under Section 245 on receipt of refund request when there is a tax due from the taxpayer’s end. The intimation will be in reference of refund due that can be set off against a tax due.
Tax Treatment of Income Tax Refund
- As the refund is just the excess tax that is paid back to you it’s not treated as income.
- Tax refunds are not taxable.
- If you have received any interest on the delayed refund payment, then interest portion of the refund amount is treated as income for the assessee
- This income is taxable as per the applicable income tax slab rate of the respective assessee.
Income Tax Refund Helpline
The process of claiming an income tax refund can sometimes be tricky. To make the process easier for taxpayers, the Income Tax Department offers its customer care service. Taxpayers can avail the service for queries or issues concerning income tax refund, re-issue and rectification. Here are some important details related to income tax refund helpline:
- Contact Numbers: 18001034455 (Toll-free)/+91-80-46605200
- Working Days: Monday to Friday
- Working Hours: 00 A.M. to 08.00 P.M.
Important Points to Remember
A small error in e-filing could land you up in the trouble of denial of tax refund or delayed refunds. Here are some of the important points to be noted:
- If you expecting a speedy processing of income tax refund, e-file your returns before the due date
- Choose the correct tax form for filing your income tax return to avoid delays and denial of tax refund
- Ensure your details as per Form 16 matches with the details of tax credit statement Form 26AS.
- The Income Tax Department refers the tax credit statement Form 26AS for scrutiny.
- If details are not correctly reflected in Tax Credit Statement Form 26AS, the Income Tax Department may deny your claim of tax refund.
- The mismatch could be due to wrong entry of PAN details by your employer or bank etc.
- It could also be due to non-deposit of TDS to government by the deductor. Hence, it is important to take corrective measures to avoid any delay of refund.
- Ensure to mention the details correctly. It gets difficult to get the refund when the wrong bank account number is quoted.
- Currently, the Income Tax Department credits the refund amount directly to the bank account of the taxpayer.
The Income tax department gives the facility to check the income tax refund status online with your e-filing login. Timely review of status can help the taxpayer take corrective measures. The Income Tax Department refunds the amount if it finds authenticity in your request after scrutinizing all the documents and facts.