Income Tax Taxation

Income Tax Refund for Salaried – A Comprehensive Guide

An individual can take benefit of an income Tax Refund once his tax liability is below actual taxes which he has paid. This happens when the advance tax, self assessment tax paid/TDS deducted is higher than the total tax liability of the taxpayer. This is given out to the taxpayer by the Tax authorities. Let’s understand more of it.

Who is Qualified for Tax Refund?

There are several situations wherein a person becomes eligible for tax refund:

• If the taxpayer pays extra tax as a self-assessment but he is likely to pay less for a regular assessment.
• If TDS is deducted by the employer or any of the banks of the taxpayer is in excess of the latter’s tax liability through regular assessment.
• In circumstances where the alike income of a taxpayer gets taxed in a foreign country (with which the government of India has an agreement help avoid double-taxation effect) and also in India.
• If the taxpayer hasn’t acknowledged an investment which provided a tax benefit to him.

How to Get Income Tax Refund in India?

An income Tax refund can be applied for by way of filing one’s return of income. Typically the return filing due date each year is the 31st of July, if not extended by the department. Ensure that you file return on time to avoid penalty.

A person may file their return through uploading the filled form or by providing the required data in online forms.

How Much Income Tax does one get back?

To know the total amount of income tax one is entitled to get back as a refund, one requires calculating the actual tax liability. If the taxes paid by a person are above his tax liability then the additional taxes gets refunded back to them by the tax department. The income tax calculator can be used to find out the tax liability and the refund that one is liable for.

How long does it take to get a Tax Refund?

The tax refund is administered within 2 to 6 months from the date of e-filing of persons return online. The refund may take longer time if one files its return physically.

How is tax refund paid?            

A tax refund is paid either by cheque or through a direct credit to one’s bank account provided to the department.

Can one claim a tax refund from previous years?

In an Assessment Year, the claiming of tax refund for Previous Years is possible for up to 2 Previous Years or Financial Years.

How can one check Income Tax Refund status online?

The process to check refund status online, one can visit the website https://tin.tin.nsdl.com. And follow the steps mentioned to see the refund status.

You may be required to provide PAN details, provide relevant assessment year and then you can easily check the refund status.

What is the validity time period of Refund?

The validity time period for any refund is a period of 90 days. After this mentioned time, it is marked as expired and canceled.

What is to be done if the Income Tax Refund cheque expires?

If the refund cheque issued by Department expires then one can make the Income Tax refund reissue by creating online request from the Tax e-filing portal.

Is income tax refund Taxable?

The Income-tax refund won’t be taxable in one’s hands as it is only the receipt of the extra taxes and not the income earned. The income earned is taxable and it is not the tax refunds.

Still, if any person has received the amount of interest on tax then this interest amount is taxable according to slab rates which are applicable to that person. This will be included in the income amount of the year in which the refund is received.

How does a tax refund arise?

The income refund arises where the employer has done excess TDS deduction on salary or employee has not declared their investment, so at the time of filing income tax returns, need to claim the refund.

Is one eligible for any interest on the Tax Refund?

Yes, any individual is qualified for interest on the amount of refund payable. Interest on refund is payable if the following conditions are satisfied:

If the return is filed on or before the due date of the assessment year relevant  to the financial year for which the return is filed.

The amount of interest is calculated @0.5% per month or 6% per year from the first day of the Assessment Year till the date when the refund is paid to the assessee. Even a part of a month is considered as a full month for interest calculation purposes.

It is important to know that the interest is payable only when the amount due is in excess of 10% of the tax payable by the taxpayer.

Is it vital to file the tax refund within the due date so as to claim a Tax Refund?

No. One can claim the tax refund even though one has filed a belated tax return.

What are the possible reasons behind delay in Income Tax refund?

There can be a number of reasons why your tax refund is taking time. The most common reason of all is the fact that you could have entered wrong bank account details in the ITR form.

Always ensure that the bank account specified for refund is pre validated and is also linked with PAN. Other reason for delay could be that there is an error in calculating the refund.

What should one do if the tax refund is not received?

In such a scenario, one needs to contact the Central Processing Centre of the Income Tax Department. It may be a possibility that your return may not have been processed completely. Once files are transferred to the assessing officer, one may follow up for refund.

Conclusion

One should be always aware of scam emails asking for bank details to process income tax refund. Beware of such scam. Don’t fall in the trap of these scamsters.

Read our article: The Concept of Tax Evasion and Tax Avoidance: Definition and Differences