How to claim income tax refund

How to claim income tax refund

You are eligible to receive income tax refund when you have paid more tax to the government than your actual tax liability. This usually happens when the advance tax, self-assessment tax paid and/or TDS, TCS deducted of the taxpayer is higher than the total tax liability of a taxpayer during the financial year.

You can claim this tax refund at the time of filing your income tax return (ITR). Currently, the last date of filing ITR is July 31, 2023 for FY 2022-23 (AY 2023-24. If you are eligible for an income tax refund, here is how you can claim it.

 

Process to claim income tax refund

A person can claim the tax refund of the excess tax paid/deducted during a financial year by filing his or her income tax returns for that year. Sundara Rajan TK, CA and Partner at DVS Advisors LLP says, "A person can file his/her income tax return either using online method or using JSON utility."

Since 2018, the tax department has started providing pre-filled ITRs on the online platform. However, it is recommend that one should cross-check pre-filled information in the ITR form to avoid any error.

Tax refund claimed shows in ITR filed by you

"Once you fill up the entire ITR form applicable to you, the ITR form (either online method or JSON utility) will automatically calculate the income tax refund which is due to you. This will be shown in the 'Taxes Paid' section of the ITR form," says Rajan.

Do keep in mind that the refund amount claimed by you at the time of filing ITR may not necessarily be accepted and paid by the tax department. The refund amount, if any, that you will be paid will be decided by the tax department after processing your ITR. Once you file and verify your ITR, the income tax department will process it and verify the genuineness of the claim made.

Remember you need to ensure that the bank account in which you wish to receive the refund amount is pre-validated. The tax department has previously announced that it will issue e-refunds to the bank accounts in which PAN is linked and is pre-validated on the new e-filing income tax portal.

 

After processing of return, an intimation will be sent to your registered email ID informing you about the outcome of the processing of ITR. In most cases, intimation under section 143(1) of the Income-tax Act, 1961 is sent to you showing any one of the following:

· That your tax calculation matches that of the tax department and no further tax is payable by you;

· That your calculation does not match that of the tax department and there is additional tax (called tax demand) payable by you or your refund claim is rejected or accepted partially i.e. reduce the amount and;

· That your calculation matches that of the tax department and refund claim is accepted by it.

 

In case the department wants more information, or your case is picked up for scrutiny then notice under a different section may be sent to you instead of under section 143(1).

In case refund due to you is accepted, the intimation sent will also state the amount of refund that is payable. This intimation will have the refund reference number. One can track the status of his/her refund on the new income tax e-filing portal. Alternatively, one can track the refund status by visiting https://tin.tin.nsdl.com/oltas/refundstatuslogin.html. The website is user-friendly as it requires only PAN and assessment year information to check the status of refund.

The department has designated State Bank of India (SBI) for payment of refunds by directly crediting it into the taxpayer's account. It is advisable that you mention the correct bank details (such as bank account number, IFS code) in your ITR form to get timely payment from the department.

At the time of filing ITR, you are required to nominate the bank account in which you wish to receive the income tax refund. Refund, if accepted as due, will normally be directly credited to this bank account.

Interest on income tax refund

 

An individual will also receive the interest on the income tax refund if the ITR is filed irrespective of the deadline.

Rajan says, "The period for the calculation of interest on refund is based on mode of tax payment:

· Where refund is of excess payment of advance tax or TDS or TCS:

· if return is filed on or before due date, period shall be from April 1 of relevant assessment year to the date of refund being granted OR,

· where return is filed after the expiry of deadline, the period shall be date of furnishing ITR to the date of grant of refund

· Where refund is of excess self-assessment tax paid: The period shall be from the date of furnishing of return or payment of self-assessment tax, whichever is later, to the date on which refund is granted.

· In any other case: Interest shall be calculated from date of payment of tax or penalty (date on and from which the amount of tax or penalty specified in the notice of demand is paid in excess of such demand) to the date on which refund is granted"

 

However, no interest is payable in case of points (a) and (b) if the amount of refund is less than 10 percent of the tax liability. Also, if the payment of refund is delayed due to any action of the deductor then such period shall be excluded from the total period for which interest payable is calculated.

Interest is calculated using the simple interest method on the amount due for refund at the rate of 0.5 percent for a month or part of the month or at 6% per annum.

Interest to be paid by you in case of excess refund by the department

 

Do you know you will be required to pay interest on any excess refund granted by the Income Tax department?

Section 234D of the Act states that if the department during regular assessment of return finds that amount of refund paid to the taxpayer is higher than the amount he/she is eligible for, then they can recover the same along with interest.

Regular assessment is assessment done after the initial assessment. Initial assessment is done when the return is processed for the first time. Regular assessment can be described as the scrutiny of the income tax return filed by the assessee.

The rate of interest levied by the department is same as interest on refund paid by the department, i.e., 0.5 percent per month or 6 percent per annum.

The period of interest is taken from the date of grant of refund till the date of the regular assessment and is calculated using the simple interest method.

 

Refund pending due to incorrect details

At times it may happen that you have filed your ITR with a refund claim but you haven't received it. It may be because of the following reasons:

· Once the department has done the initial assessment of your verified ITR, it has found that no refund is payable to you. This will reflect in the notice under section 143(1) of the Income Tax Act that the tax department will send you after processing your return. Therefore, if the notice shows a refund due to you then it will be issued but if the notice shows nil refund then it means that your refund claim was not accepted as your calculations did not match those of the department's.

· Department has processed your refund, but you have not received it due to wrong bank details. If your refund is pending due to incorrect details provided by you, you can request the department to re-issue the same after giving the correct bank details.

· Once you have filed your ITR and verified it, regularly check the status of your return if you have made a refund claim. This helps you track the processing of your ITR and refund (if any). It also helps check if you have made any mistake while filing the return.