How To Claim Income Tax Refund

• When you have paid more tax than your actual tax liability
• When TDS amount deducted is more than your actual tax liability
• When you have invested in some tax saving instrument at a later date in your financial year and want to claim a refund correspondingly
• Due to double taxation; for example, if you are an Indian citizen but earn income from another country. India has Double Taxation Agreements with many countries where, if tax is deducted at the source country, it will not be taxed in India.

How to claim an income tax refund?

The procedure is quite simple. By filing his or her income tax returns for that year, a person may claim the refund of the excess tax paid/deducted during a financial year.

• Under the Income Tax Act, in order to claim the refund, a person is required to file his/her return by 31st July (unless the deadline is extended) in the relevant assessment year. For any FY, the fiscal year which immediately succeeds is the corresponding assessment year (AY).
• You can either download and use the Excel/Java utility form or manually enter the correct details in the online forms (only for those willing to send ITR 1 or ITR 4) to file your income tax returns.
• Once you fill the entire ITR form applicable to you and press the validate button on the 'Taxes paid and proof' sheet, the system will automatically calculate the refund owed to you (as per the details you entered) and the refund amount will appear in the 'Refund' row.
• This is the amount of refund claimed by you, and not necessarily what the IT department accepts and pays. After processing your return, the IT department will determine the refund amount, if any, that you will be paid.
• When you file your ITR, it will be reviewed by the I-T department and checked for the genuineness of the submission made.

How is the refund paid?

• Earlier, the tax department used to issue e-refunds to the bank accounts with which PAN is linked and pre-validated on the e-filing website. Please note that, this year, you need to make sure that the bank account you wish to receive the amount of the refund is pre-validated.
• Based on the processing of your ITR submission, an intimation will be sent to you after processing your returns. In certain cases, an intimation pursuant to section 143(1) is sent to you stating either of the following: 
  • That your tax estimate matches that of the tax department and no additional tax is payable by you
  • That your calculation does not match that of the tax department and that there is additional tax (called tax demand) payable by you
  • That your refund application is denied or partly approved, i.e. reduced refund amount
• If the IT Department is satisfied with your submission, it will acknowledge the same and process the refund.
• The intimation shall be sent to you via email in case of e-filed returns. Usually, an SMS is also sent to your registered mobile number confirming that your ITR is being processed. If the department wants more information or your case is picked up for scrutiny, then you may receive a notice under another section instead of under section 143(1).
• The intimation will also specify the amount of refund that is owed in the event the submission is approved by the IT Department. The department provides a reference number for the refund. You can track your refund status by logging in to the website of income tax e-filing and clicking on the status of refund / demand under the tab 'My Account.'
• State Bank of India is the designated bank that processes all refunds into the taxpayer's account. They are usually done by direct credit. You have to make sure to mention the correct bank details in your ITR form so that you can get your refund on time from the department.
• The ITR has now introduced a separate row to fill in the bank account information where you want the refund to be credited. Refund, if acknowledged as due, would usually be credited directly to the bank account you gave in the tax return for that reason.

Interest on Income Tax Refunds

In the case that you are entitled to obtain a refund, as provided for in section 244A, interest is owed to the taxpayer/assessee according to the below conditions. Interest on the refund amount shall be owed to an assessee if the return is submitted on or before the ITR due date during the relevant assessment year, which is applicable to the financial year for which the return is submitted.

In case of refund due to excess payment of advance tax or TDS:

(i) If you file the return on or before due date, interest shall be calculated from April 1st of relevant assessment year to the date refund is granted

(ii) If you file the return after the due date, interest shall be calculated from the date of furnishing of return to the date of processing of refund

If refund is claimed due to excess self-assessment tax paid: 

(i) Interest calculation period shall be from the date of filing return or payment of tax, whichever is later up to the date on which refund is granted.

Note: No interest shall be paid however, if the refund amount is less than 10 % of the tax amount. Furthermore, where the processing of the refund is postponed due to some intervention by the assessee, then this period is deducted from the cumulative period over which interest payable is measured.

Also, one must remember that the interest received on the refund amount is taxable. The assessee is supposed to include, in his overall net profit, the tax paid to him on the refund when filing return for the financial year in which he received it.

Interest is calculated using the simple method of interest on the amount due to be refunded at a rate of 0.5% for a month or part of a month or 6% per year.

FAQs

End Note

Filing the income tax returns is an important annual task for all taxpayers. Though the Income Tax Department has simplified the process through various online measures, many aspects of ITR still remain elusive to the common man. An individual should gather all required information before filing his ITR to avoid errors and revisions. Also, if you have paid excess tax, worry not as you can claim tax refunds on it.