Generally, people received a mail from the income tax department informing that you are eligible for an Income Tax Refund and it will be credited to your bank account. People usually ask me the question that what is refund and they were also in confusion about the refund. Here in this article, we will discuss some important fact related to Income tax Refund like what is refund? How to claim it?
What is Income Tax Refund?
The income tax refund is a process followed by the income tax department by which department returns any excess tax paid by the taxpayer during the particular financial year in the form of TDS or Advance tax. This may happen when the amount of income tax paid by a taxpayer is more than his/her actual income tax liability for that particular financial year. The excess income tax paid 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 Income Tax Return is subject to verification by the Income Tax Department.
When can you claim an Income Tax Refund?
The following are examples 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 TDS by your employer exceeded your actual tax liability for the particular Financial Year.
- 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 the 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 a 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.
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 the claiming an IT 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 2019-20, the last date to claim an income tax refund is 31st March 2020, the last date for delayed filing of ITR for FY 2018-19.
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 an income tax refund for such income. For example, a parent/guardian can claim a refund on behalf of a minor child if, the minor’s income is added to that of the parent or guardian.
Income Tax Refund on Appeal
When a 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 the taxpayer’s side in such cases. It should be noted that if the assessment was canceled 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 refund if the return of income is furnished on or before the due date of ITR filing. 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 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 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 an income and is subjected to income tax as per the applicable tax slab.
Income Tax Refund Helpline
For queries pertaining to an 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 protected]
Alternatively, for refund related queries or for any modification in refund record processed at CPC Bangalore, you may contact on Toll-free No. 1800-425-2229 or 080-43456700.
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 if any.