25 September, 2024
Ever wondered why and how you get an income tax refund? The term sounds familiar but let’s look into the details of how and when you can get an income tax refund. Through this article let us explore all about the income tax refund.
What is an Income Tax Refund?
An income tax refund is a means through which the Income Tax Department reimburses any excess tax amount paid by the taxpayer for that specific financial year. A refund applies when the amount of tax paid by the taxpayer is higher than the actual tax liability for that particular financial year. Under Section 237 of the Income Tax Act 1961, you can claim the excess tax. However, this is after the verification and the calculation only once you have filed your income tax return and the same is vetted by the income tax department authorities.
Income tax refund- When are you entitled to it?
When you file your income tax return, post which bracket you fall under any of the following occurrences you can claim an income tax refund.
Suppose you are salaried and did not furnish all the requisite investment proofs to your company to claim the stipulated deductions. As a result of the amount of taxes deducted by your employer surpass your actual tax liability for that particular year, you can proceed to apply for an income tax refund.
The tax deducted at source (TDS) deducted on your interest income earned through your bank Fixed Deposits or other investments exceeds the actual percentage of TDS.
If you fall under the category of the highest tax slab and the advance tax paid by you exceeded your actual tax liability for that specific financial year, then you can claim an income tax refund.
Suppose you are a Non-Resident Indian- NRI and choose to opt for double taxation. You can then claim an income tax refund. Let’s understand this with an example when a person is a citizen of one country but has the benefit to derive additional income from another country. Suppose you are a citizen of India, but a resident of an overseas country either employed, carrying out business or for any other means. In that case, you have the option to implement the Double Taxation Avoidance Agreement (DTAA). Hence, if you have a Non-Resident Ordinary- NRO Deposit created in India with an Indian Bank. The interest earned on such a deposit is taxable as per your income tax slab. However, if you pay tax in your country of residence, you can make the most of DTAA and claim an income tax refund for the TDS deducted on the interest earned on your deposits in India.
To understand how an income tax refund works, we have put together an example for you below:Particulars
Amount (in Rs)
Income (A)
XXXXX
Gross Tax Liability on (A) : (B)
XXXXX
Less: Foreign Tax Credit
XXXXX
Net Tax Liability
XXXXX
Add: interest on Tax Liability (234 A, B and C)
XXXXX
Aggregate Tax Liability
XXXXX
Less: Taxes Paid (C)
(Advance Tax, Tax Deducted at Source (TDS), Tax Collected at Source (TCS) and Self-Assessment Tax)XXXXX
Tax payable (If B > C)
XXXXX
Tax refund (If B < C)
XXXXX
How to check your income tax refund status?
There are two possible means to view your refund amount and check your income tax refund.Refund reflects in ITR:
Once you fill up all your income details in the ITR form and click on the Validate Button on the ‘Taxes Paid and Verification’ sheet, the system will automatically calculate the refund due to you. It is as per the data entered by you into the respective sheets, and the refund amount will reflect on the page under ‘Refund’. However, keep in mind that this refund amount you claim is not necessarily acceptable and payable by the income tax department. Once your ITR is submitted to the Centralised Processing Centre- CPC, the income tax department will decide whether you are pertinent for an income tax refund or not.How to check ITR refund status:
You can check your income tax refund through the following ways:The NSDL website
E-filling portal of Income Tax Department
Here is our step-by-step guide for you to check your refund through both these options.NSDL Website
Step 1: Visit the NSDL website.
Step 2: On the displayed page, fill in your details. You only need your Pan Number and the Assessment Year. Click proceed.
Step 3: The page will display your income tax refund pending status.E- filling portal of income tax department
Step 1: Log in to the E-Filing portal
Step 2: From your dashboard, select view returns/forms.
Step 3: From the ‘My Account’ tab, select ‘Income Tax Returns’ from the drop-down list. Click submit.
Step 4: Click on the requisite acknowledgement number displayed for the specific assessment year of filing.
Step 5: A page showing your return details along with income tax refund status will be displayed.
View your Income tax refund and its status in just a few steps.
What if my income tax refund is above ₹50,000?
Do note that if your income tax refund is above ₹50,000, it may be subject to additional scrutiny by the Income Tax Department. This is done to ensure that your tax refund amount is correct and there’s no fraud involved. Hence, you may want to consider consulting a professional to file your income tax returns. You can use the Income Tax Calculator from your bank to calculate your tax refund amount without any errors.
To read more on online income tax payment, click here.
Please note: With taxpayers requesting the tax department and finance ministry to extend ITR fillings, the department of revenue of the finance ministry has in a notification extended the deadline for filing income tax returns to 15 March.
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* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.