“The income tax refunds are a symbol of the trust that the government has in the taxpayers.”
– Narendra Modi
Table of Contents
Income Tax Refund
The income tax refund is a refund of taxes previously paid to the government. It happens when an individual or business has paid more money in taxes than they actually owe. Taxpayers may be eligible to receive a refund if they have overpaid their taxes, or if they qualify for certain credits or deductions.
Calculation of Income Tax Refund
Income Tax Refund in India is the amount refunded to the taxpayer when the amount of tax paid by them exceeds the amount of tax due for the year.
|It is the difference between the amount of tax paid and the amount of tax due for the year.
Mr A is an individual earning Rs. 10,00,000 in a Financial Year (FY) 2019-20.
His tax liability for FY 2019-20 is Rs. 1,60,000 (i.e. 10% of Rs. 10,00,000).
However, he paid Rs. 2,00,000 to the Income Tax Department.
In this case, the difference of Rs. 40,000 (i.e. Rs. 2,00,000 – Rs. 1,60,000) will be refunded back to Mr. A by the Income Tax Department as Income Tax Refund.
How Can I Claim My Income Tax Refund?
Income Tax refunds are generally processed and refunded by the Income Tax Department.
➡️ You can claim your refund by filing an Income Tax Return (ITR) with the department.
➡️ You can use the e-filing portal of the department to file your ITR and then track your refund status.
➡️ Once the refund is processed, the amount will be credited to your bank account or sent to you via a cheque.
Due Date to Claim Income Tax Refund
The claim for a refund must be made within one year from the end of the assessment year for which the refund is claimed.
Refunds due to overpayment of taxes can be claimed within three years from the end of the assessment year.
➡️ You must provide details of the bank account to which the refund will be credited.
➡️ Your PAN card and bank account details must be updated in the income tax filing portal.
➡️ You must provide the required documents to support the claim for the refund.
➡️ You must file the return of income within the prescribed time limit to be eligible for the refund.
Who is Eligible for Income Tax Refund?
You are eligible to claim Income Tax refund based on the following factors:
- If the tax you have paid is more than the tax you should have paid due to any reason.
- If you have made excess TDS deductions or have paid advance tax more than the actual tax liability.
- If you are eligible for various tax deductions and exemptions.
- If you have made any contributions to certain specified investments or savings schemes such as Public Provident Fund (PPF), National Pension Scheme (NPS), Equity Linked Savings Scheme (ELSS) etc.
- If you are eligible for any tax refunds due to any special provisions or schemes.
- If you have paid any professional tax or any other tax that is not applicable.
- If you have made any donations to any charitable institutions and organizations that are eligible for tax deductions.
How to Get Income Tax Refund in India?
Let’s have a look at the steps to get an Income Tax Refund in India.
- Check Your Eligibility: First, you need to make sure that you are eligible for a tax refund. You can use the income tax calculator to estimate your refundable amount.
- File Your Tax Return: Once you have determined your eligibility for a tax refund, you will need to file your tax return. The due date for filing your return is usually July 31st.
- Claim Your Refund: After filing your tax return, you will need to claim your refund. To do this, simply log into your e-filing account and click on the “Refund” tab.
- Check Your Bank Account: Once your refund has been processed, you will receive a confirmation email. The refund amount will then be credited to your bank account within four to six weeks.
How to Calculate the Amount of Tax Refund?
➡️ To calculate your tax liability, you should first know your taxable income which is the amount of your income from which tax is due. This income can include wages, salaries, bonuses, investments, business income, etc.
➡️ Once you have this figure, you can then calculate the amount of tax that is due using the tax rates and deductions that are applicable to your income.
➡️ Once you have calculated the tax liability, you can then subtract the amount of taxes that you have already paid from the tax liability.
➡️ The difference between these two figures will be the amount of refund that you will receive.
How is Income Tax Refund Processed?
➡️ Income Tax refunds in India are processed by the Central Board of Direct Taxes (CBDT).
➡️ The refund process is initiated when the taxpayer files an Income Tax return.
➡️ The return is reviewed by the Income Tax Department, and if the taxpayer is entitled to a refund, the CBDT will issue it in the form of an Electronic Clearing Service (ECS) or cheque.
➡️ The refund may take several weeks to process and issue.
How is Payment of Income Tax Refund Made?
- Direct Bank Transfer: This is the most common and preferred mode of refund payment in India. The taxpayer’s bank account is credited directly by the income tax department.
- Cheque: A physical cheque is sent by the department to the taxpayer’s address. The taxpayer can then encash the cheque at their bank.
- Demand Draft or Pay Order: In this method, the refund amount is paid through a demand draft or pay order which is sent to the taxpayer’s address. The taxpayer can then encash the draft or pay order at their bank.
- Tax Credit in Taxpayer’s Account: In this method, the refund amount is directly credited to the taxpayer’s tax account. This is most suitable for taxpayers who have already paid taxes for the current assessment year.
How can I check my Income Tax Refund Status Online?
➡️ You can track your Income Tax refund in India by visiting the official website of the Income Tax Department of India.
➡️ On the homepage, click on the “Know Your Refund Status” tab
➡️ Enter your PAN number and the assessment year for which the refund is being claimed.
➡️ You will be able to view the status of your refund.
Interest on Delayed Income Tax Refund
Interest on delayed income tax refunds in India is charged at the rate of 6% per annum, compounded quarterly, from the due date of refund till the date of refund. The amount of interest on the tax refund shall be calculated from the date on which the tax was paid to the refund date.
How to Update Details with Income Tax Department?
- Visit the Income Tax Department’s website at www.incometaxindia.gov.in.
- Click on the ‘e-Filing’ option on the homepage.
- Log in to your account with your user ID and password.
- Click on the ‘Profile Settings’ tab.
- Select the ‘Personal Details’ option.
- Update the necessary details such as your name, address, mobile number, etc.
- Save the changes made by clicking on the ‘Submit’ button.
- A confirmation message will be displayed on the screen to confirm the successful update of the details.
How to Apply for Refund Reissue?
➡️ In order to apply for a reissue of an income tax refund in India, you can visit the official Income Tax e-Filing website (incometaxindiaefiling.gov.in).
➡️ On the homepage, select the option “Refund Reissue Request” under the “My Account” drop-down menu.
➡️ You will then be directed to a page where you will be asked to enter your PAN and the assessment year for which you need the refund to be reissued.
➡️ After providing the required information, click on the “Submit” button.
➡️ The process of applying for a reissue of an income tax refund in India is now complete.
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Frequently Asked Questions
What is an Income Tax refund?
An Income Tax refund is the amount of money that is returned to the taxpayer from the Income Tax department after the taxpayer has paid more tax than they were liable to pay.
How do I file for an Income Tax Refund in India?
You can file for an Income Tax Refund in India by filing a return of income for the relevant assessment year. You can either file the return of income yourself or get it done through a tax consultant.
How long does it take to get an Income Tax refund?
It typically takes 3-4 months for the Income Tax department to process the tax return and issue the refund.
What documents do I need to file for an Income Tax refund?
You need to have documents such as your PAN card, bank account details, income details, and other documents related to your income to file a return of income and claim the refund.
Is there a penalty for filing an Income Tax return late?
Yes, there is a penalty for filing an Income Tax return late. The penalty is usually a percentage of the taxes due.
Who should I contact for refund related queries?
For income tax refund related queries, you should contact your local Internal Revenue Service (IRS) office or the IRS's toll-free hotline at 800-829-1040.
You can also find more information about income taxes on IRS.gov.