Income Tax Refund

Income Tax Refund: Overview

About Income Tax Refund?

Income Tax Department returns any excess tax that has been paid by you. This happens when your actual tax liability is less than the amount of tax paid. As per Section 237 of the Income Tax Act, 1961, assesses can claim a refund for tax amount paid in excess. Refund orders are issued by Income Tax Department only after the thorough verification of facts and circumstances. Let’s say, you fail to furnish all your investment proofs on time, your organization in that case deducts the taxes on basis of the proofs of investment submitted whereas your actual investment is higher. In situations like these, the amount that is paid in excess can be claimed back from the government and is known as the Income tax refund. The Income Tax department also gives you facility to adjust your tax refund amount against tax dues that are outstanding, under Section 254 of the IT Act.

Eligibility Criteria for Income Tax Refund

Below are cases for which you are eligible to claim income tax refund:

  • If taxes paid by you on the basis of self assessment are more than what you are liable to pay
  • If Tax deducted at source by your employer or by your bank is more than what you are liable to pay as per your regular assessment. Let’s say, your tax liability for the financial year is Rs.25000 and the TDS deducted by your employer is Rs.30000. In this case, you can claim a refund Rs. 5000 (30000-25000) for extra amount of tax deducted.
  • When you fail to declare the details of tax-saving investments on time, then you are eligible for claiming tax refund on declaring the investments and by providing the proofs for same to the income tax department.
  • In cases of double taxation- There are a few countries with which Indian government has Double Taxation Avoidance Agreement. For an instance, let’s assume you are a non-resident Indian working in foreign country (with which India has double taxation agreement). You hold a NRO (non-resident ordinary) deposit in an Indian bank and interest on such fixed deposits shall be taxed as per the applicable slab rate. Banks are obliged to deduct the tax at source before crediting the interest into your account. Now, if you qualifies to be tax resident of foreign country where you reside, you may claim for refund of TDS deducted on interest earned in India on your NRO deposit.

Time Limit for claiming Income Tax Refund

Refund needs to be claimed within a year from the last date of the assessment year. However, only for some of the cases, assessing officers are allowed to consider the refund claims that are filed beyond the prescribed time limit.

Following terms and conditions are to be kept in mind:

  • In case there is scrutiny of delayed claims of refund that needs to be reconsidered by assessing officer
  • No interest will be allowed to pay on refund of belated claims
  • No income tax refund claims are to be entertained after the completion of 6 consecutive assessment years.
  • The refund amount should not exceed Rs.50 lakh or more for one assessment year.

Claim Process – Income Tax Refund

Claiming an income tax refund is not a difficult process. Here are few steps to follow for getting income tax refund

  • File your Income Tax Return

First and foremost requirement for getting a tax refund is to file your income tax return on time. Income tax returns can be easily filed online the official website You get the acknowledgement number also for filing the return online with your digital signature. You can also physically sign the ITR-V form generated online and submit it to Income tax processing centre within specified timeline (within 120 days of return filing). Usually, due date for income tax return filing is July 31st every year unless the same is extended by the Income Tax Department.

  • Hold back till the Refund is processed

After filing the ITR, income tax department will scrutinize and process the refund, if any. Refund claims are processed through state bank of India. Mode of payment of refund is based on the details furnished by you in income tax return file. It can be through ECS (electronic clearing system) or through demand draft or cheque. If you choose to get the refund credit through ECS, it’s essential to provide all the necessary details such as bank account number, bank branch and IFSC code correctly in the income tax return file.

On the other hand, if you choose to receive the refund by way of demand draft or cheque, the same will be sent to your communication address as mentioned in the income tax return file. Usually, it takes about 3-6 months to get the refund from the date of e-filing the income tax return. It may even take longer time if returns are filled physically.

As we know, simplest way to get the income tax refund is by filing your income tax return for the year. In case your tax return record says you have paid in excess, then the extra amount paid has to be claimed as refund separately. However, it’s important to ensure this excess tax paid is reflecting in your Tax credit statement from 26AS to get the tax refund. Each and every detail of tax paid for the year is reflected in your Tax credit statement Form 26AS as it is linked to your Permanent Account Number (PAN).

In case you do not receive refund within 6 months, log on to the NSDL website ( Fill in your PAN number and other details to check the status of your tax refund

  • If the status says- ‘refund had expired’ –request for reissuance of refund by logging into e-filing portal. In case return was filed physically, then contact your income tax assessing officer.
  • If the Status says – ‘refund had returned’- which means refund payment cheque or demand draft sent to communication address has been returned undelivered or the bank account details provided for ECS are incorrect. In such cases, you should contact your assessing officer to get the refund reissued. In case of e-filing, place a request for reissuance of refund in your e-filing account.
  • If the status says – ‘refund paid’- this could be a delay from processing banks end.

Check your account number, IFSC code and other bank details are correctly mentioned. Check with concerned department of SBI for further guidance.

  • If the status says – ‘no demand no refund’ which means your IT return is processed, but income tax department has found (after scrutiny of facts and circumstances) that there was no extra tax paid. In such cases you can file for rectification by submitting all the proofs of investment along with form 16.

Another way of claiming a refund is filling up Form 30. Form 30 is a refund request form that needs to be submitted to the Income Tax Department. This request letter talks about the tax amount paid by you which is more than the actual tax liability for the particular assessment year. Form 30 needs to be submitted by the end of the financial year. You need to also enclose the investment proofs and other documents to justify the refund claim. Below is the sample format of Form 30:

Income Tax Refund in Special Cases

Under Section 238 of the Income Tax Act, 1961, if a person or his legal representative is unable to claim tax refund due to death, insolvency, incapacity, liquidation or due to any other cause, he/she is entitled to claim such refund for the benefit of such person or his estate. Under the provision of this section, if any person’s income is clubbed with any other person’s income, in such cases only the latter alone shall be entitled to receive the income tax refund for such income.

Income Tax Refund on Appeal

As per Section 240 of the Income Tax Act, 1961, if there is any refund arises as a result of any order of appeal by the assessing authority, there is no requirement to place a request of refund claim from assesses side. In case the assessment is cancelled and there was a direction to make fresh assessment, in such cases the refund shall become due only after making the fresh assessment.

Interest on delayed Income Tax Refund

Under the provisions of Section 244A of the Income Tax Act, 1961, if there is any delay in payment of refund, the interest at the rate of 6% p.a will be payable by the Income Tax Department. Interest on refund amount is calculated from the date of payment of tax to the date of actual payment of refund.  For instance, let’s say you have claimed for refund of Rs. 5000 for the assessment year 2016-17 and the refund was paid to you in the month of March 2017. In this case, interest on refund will be calculated from April 2016 to March 2017. It’s important to note that the interest is payable only if the amount of tax refund due is more than 10% of the tax payable by you. However, interest amount for the period attributable on the part of the assesses will not be paid by the Income Tax Department if the delay is found to be from the side of assesses.

Setting- off Income Tax Refund against Outstanding Tax Dues

Under the provisions of Section 245 of the Income Tax Act, 1961, assessing officers are given a power to set-off or adjust the income tax refund claimed against any tax dues which is outstanding from the assesses/ tax payer. IT department sends intimation under Section 245 on receipt of refund request when there is a tax due from tax payer’s end. The intimation will be in reference of refund due that can be set off against a tax due.

Tax Treatment of Income Tax Refund

As the refund is just the excess tax that is paid back to you it’s not treated as income. Hence, tax refunds are not taxable. However, if you have received any interest on the delayed refund payment, then interest portion of the refund amount is treated as income for the assessee and taxable as per the applicable income tax slab rate to the respective assessee.

Important Points to Remember

In the era of digitalization, a small error in e-filing could land you up in a trouble of denial of tax refund or delayed refund. Here are some of the important points to be noted:

  • If you expecting a speedy processing of income tax refund, e-file your returns before the due date
  • Choose the correct tax form for filing your income tax return to avoid delays and denial of tax refund
  • Ensure your details as per Form 16 matches with the details of tax credit statement Form 26AS. The Income Tax Department refers the tax credit statement Form 26AS for scrutiny. If details are not correctly reflected in Tax credit Statement Form 26AS, Income Tax Department may deny your claim of tax refund. The mismatch could be due to wrong entry of PAN details by your employer or bank etc. It could also be due to non-deposit of TDS to government by the deductor. Hence, its important to take corrective measures to avoid any delay of refund.
  • Ensure to mention the details correctly. It gets difficult to get the refund when the wrong bank account number is quoted as it can get deposited to some other bank account. Hence, it’s very important for the assessees to mention the bank account details like bank account number, IFSC code MICR code and other details correctly without any error to get the refund on time. Now, Income Tax Department is crediting the refund account directly to the bank account of tax payer.

To sum up, it’s important for every taxpayer who is eligible for refund to keep track of the status of their tax refund to get the amount credited in their bank account on time. The first thing to get the refund is to e-file the income tax return on time. It’s also essential to furnish the correct details, documents and proofs for the speedy processing of income tax refund. Most importantly, it’s crucial to mention the correct bank account details to get the credit. Income tax department gives the facility to check the income tax refund status online with your e-filing login. Timely review of status can help the tax payer take corrective measures. If the Income Tax Department finds the reason in your request (after scrutinizing all the documents and facts), the amount will be refunded.

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