You may have received an e-mail informing that you are eligible for an Income Tax Refund and it will be credited to your bank account by the Income Tax Department. But why did you receive the refund? How can you claim it? And above all, what is an income tax refund? Let’s find answers to all these questions in this article.
Table of Contents :
What is Income Tax Refund
Income tax refund is a process by which the Income Tax Department returns any excess tax paid by a taxpayer during a particular financial year (FY). This happens when the amount of tax paid by a taxpayer is more than his/her actual tax liability for that particular FY. The excess tax can be claimed as an income tax refund under Section 237 of the Income Tax Act, 1961. The amount of income tax refund claimed by a taxpayer by filing ITR is subject to verification by the Income Tax Department.
When Can one Claim an Income Tax Refund
The following are key instances when an Income Tax Refund can be claimed:
- You did not furnish all the investment proofs to your organization. As a result, the amount of taxes deducted by your employer exceeded your actual tax liability for the particular FY.
- Excess TDS was deducted on your interest income from bank FDs or bonds.
- The advance tax paid by you on self-assessment exceeded your tax liability for the applicable FY as per the regular assessment.
- In case of double taxation, for example – when a person is a citizen of one country but derives income from another country. However, there are a few countries with which India has Double Taxation Avoidance Agreement (DTAA). This means you can claim a tax refund if you are a non-resident Indian working in a foreign country with which India has DTAA. For example, you hold a non-resident ordinary (NRO) deposit in an Indian bank. The interest earned on such deposits shall be taxed as per the applicable slab rate. However, if you qualify to be a tax resident of the foreign country where you reside, you may claim a tax refund for the TDS deducted on interests earned in India on your NRO deposit.
How to Claim Income Tax Refund
Earlier Income Tax Form 30 was required to claim an income tax refund. However, with the advent of e-transfer of refunds, it can now be claimed by simply filing the ITR. The ITR should further be verified, either physically or electronically within 120 days of filing.
Please note that the excess tax for which a refund is claimed should be reflected in Form 26AS. Moreover, the refund is subject to verification by the Income Tax Department. It is credited only if the refund claim is found to be valid by the department.
How to Check Income Tax Refund Status
Income Tax Refund status can be checked from either of the following:
- On the NSDL website or
- On the e-filing portal of Income Tax Department
Step by Step Guide to Check Refund Status on NSDL Website
Step 1: Go to the NSDL website to track refund
Step 2: Fill in the details, including PAN and AY and click ‘Proceed’
Step 3: Your income tax refund status will be displayed, as depicted in the following image.
Step by Step Guide to Check Refund Status on e-filing Portal
You can check your Income Tax refund status via the Income Tax e-filing portal by following the steps given below:
Step 1: Log into the Income Tax e-filing portal
Step 2: Under the “e-File” menu, select ‘Income Tax Returns” and click on “View Filed Returns”
Step 3: You will see a list of your previously submitted ITRs. Select the Acknowledgement Number corresponding to the tax filing in which you have claimed a refund.
Step 4: On the next page, you will find return details along with income tax refund status.
How to Decipher the Income Tax Return Status
|Income Tax Refund Status||Meaning||What should you do next?|
|Refund Paid||ITR filing processed and refund credited.||Check with the bank to confirm the receipt of refund. If you have not received the refund, contact your bank or State Bank of India to find out the error.|
|No Demand No Refund||Tax calculation matches IT department calculation. You are neither required to pay further tax nor eligible for a tax refund.||Simply retain the applicable tax records in case they are needed at a later date.|
|Refund Status Not Determined||Your ITR has not been processed yet.||Recheck the status after few days.|
|Refund Determined and sent out to Refund Banker||Refund request was accepted by IT department and refund banker has been informed||Wait for refund to be credited to account or contact refund banker to know the status of your refund payment|
|Refund Unpaid||Refund has been accepted by the Income Tax department but not yet credited. This can be due to 2 reasons. Either the bank details provided for refund credit are incorrect; or, if opted for refund through cheque, your address is incorrect.||Reason is displayed in such cases. Correct the details and request a refund reissue.|
|Demand determined||Your tax calculation does not match with that of the IT department and an additional tax has to be paid. This means that you have to fulfil a ‘Tax Demand’ and not eligible for a Tax Refund.||Verify the information with your e-filing form to figure out the mismatch/error. If you actually find an error in your e-filing request, then make a payment to Income Tax Department within the specified timeline.|
In case there is no error in your e-filing request, file a rectification along with all the supporting information and documents to justify your refund claim.
|Rectification Processed, Refund Determined and Details sent to Refund Banker||The Rectified return has been accepted by the Income Tax department. Moreover, the refund amount has been recalculated and the refund amount has been sent to the bank for processing the payment.||Check your bank account to confirm the receipt of refund.|
|Rectification Processed and Demand Determined||Rectified return has been accepted by the Income Tax department. However, there are outstanding tax dues (tax demand) which needs to be paid within a specified time.||Pay the outstanding tax/ tax demand after cross-verifying all the details within the specified time period.|
|Rectification Processed, No demand and No Refund||Rectified return has been accepted by the Income Tax department. Additionally, you are neither required to pay any additional tax nor eligible for a tax refund.||–|
Time Limit for Claiming Income Tax Refund
As the entire process of claiming a refund depends on the submission of ITR, the time limit for claiming an Income Tax refund is the same. For any assessment year, the time period for filing your returns and claiming a refund is the end of the assessment year. Thus, for AY 2022-23, the last date to claim an income tax refund is 31st March 2023, the last date for delayed filing of ITR for FY 2021-22.
Income Tax Refund in Special Cases
- Under Section 238 of the Income Tax Act, 1961, if a person is unable to claim tax refund due to death, insolvency, incapacity, liquidation or any other cause, then his legal representative, trustee, guardian, or receiver can claim the refund on his/her behalf.
- Moreover, if a person’s income is included in the total income of any other person, then the latter can claim income tax refund for such income. For example, a parent/guardian can claim refund on behalf of minor child if, the minor’s income is added to that of the parent or guardian.
Income Tax Refund on Appeal
When refund of any amount is due to a taxpayer as a result of any order passed in response to an appeal, then the refund amount will be credited without making a claim for such a refund. In other words, there is no requirement for the tax assessee to place any additional request for refund from his end. It should be noted that if the assessment was cancelled with a direction to make a fresh assessment, the refund shall become due only after making the fresh assessment.
Interest on Income Tax Refund
An interest is compulsorily paid by the Income Tax Department if the amount of refund is 10% or more of the total tax paid. As per Section 244A of the Income Tax Act, simple interest at the rate of 0.5% per month or part of the month on the amount of tax refund is paid.
The interest is calculated from 1st April of the applicable assessment year till the date of issuing the refund if the return of income is furnished on or before the ITR filing due date. While in cases of delayed income tax filing, the interest on the refund amount is calculated from the date of furnishing return to the date on which the refund is granted.
Income Tax Refund and Outstanding Tax Dues
If a person is eligible for a tax refund and at the same time has some outstanding tax dues, the Assessing Officer or the Commissioner can use the refund amount to set off/adjust the outstanding tax payment. In such cases, a taxpayer will get a partial tax refund credited to his/her account. The IT Department informs in writing to such a person of the proposed action under this section.
Tax Treatment of Income Tax Refund
Amount of income tax refund corresponds to the excess tax that was paid by you, and thus not considered as an income. Hence, it is not taxable. However, the interest received over the income tax refund is considered as income and is subjected to income tax as per the applicable tax slab.
Income Tax Refund Helpline
For queries pertaining to income tax refund, the taxpayer should contact ‘Aaykar Sampark Kendra’. You can contact the Kendra either by calling the Toll-Free No. 1800-180-1961 or e-mail at email@example.com
Alternatively, for refund-related queries or for any modification in refund record processed at CPC Bangalore, you may contact on 1800 425 2229 / +91 80 2254 6500 / 1800 103 4455
Please note that for any payment-related query, the taxpayer can contact SBI Contact Centre Toll-Free No. 1800-425-9760.
Important Points about Income Tax Refund
- E-file your returns before the due date for speedy processing of income tax refund.
- Ensure that the amount of excess tax paid by you is also reflected in Form 26AS.
- Ensure that the details of the bank account mentioned at the time of ITR filing are correct to prevent any delay in the credit of the tax refund amount. In case you furnish incorrect details, “Refund Unpaid” will be displayed as the income tax return status.
- Timely review the income tax refund status to take the applicable corrective measures, in case any.
Frequently Asked Questions (FAQs)
Q- When am I eligible to get an income tax refund?
You are eligible to get an income tax refund from the government if you have paid taxes in excess of your financial liability for the applicable financial year. The applicable refund amount will be calculated at the time of filing ITR and credited to you as and when the refund is processed by the income tax authorities.
Q- Is tax filing mandatory, if I want an income tax refund?
Yes. If you want to claim a refund for excess tax paid during a particular financial year, filing an income tax return is mandatory in the applicable assessment year. No income tax refund will be provided if you fail to file your ITR for the applicable period.
Q- How will I get my income tax refund and when?
Currently, all ITR Forms have a field that requires you to provide your bank details including account number and bank IFSC. These details are used to credit the tax refund into your bank account once the refund request has been successfully completed by the assessing officer. Thus, in case the bank account details provided by you on the ITR form are incorrect, you might not be able to receive your refund in a timely manner. “Refund Unpaid” is displayed as the income tax return status in such cases.
Q- My refund was delayed by the government. Is there a compensation for this delay?
Yes. In case of any delay by the government or tax authorities to provide you an income tax refund, you are liable to receive interest on the amount due at 0.5% per month/ part of the month. The interest is calculated from 1st April of the applicable assessment year to the date on which the refund is granted. This is however subject to some key terms and conditions as specified in the Income Tax Act, 1961.
Q- Where can I check the status of my income tax refund request?
The best place to check the status of your income tax refund is TIN website maintained by the Income Tax Department. Details required to check the status on this website include PAN of the taxpayer and the assessment year for which the status is being checked. Alternatively, you can check the status at the e-filing portal of the Income Tax Department.
Q- Do I have to pay taxes on my income tax refund?
Amount of income tax refund corresponds to the excess tax that was paid by you, and thus not considered as an income. Hence, it is not taxable. However, the interest received over the income tax refund is considered as an income and is subjected to income tax as per the applicable tax slab.