Income Tax Taxation

What is Income Tax Refund?

Income Tax refund is a refund from the income tax department. It can be in the form of advance tax, tax deducted at source etc. In this article we shall have a look at this topic elaborately.

When is a person eligible for Income Tax Refund?

A person is eligible for income tax refund when the tax liability of the person is less than the taxes paid by him. It is issued by the tax authorities to the taxpayer. Here are the following situations when a person becomes eligible for tax refund:

• When a taxpayer pays more tax as a self-assessment but the taxpayer is liable to pay less through a regular assessment.
• In case TDS deducted by employer or bank is more than tax liability through regular assessment.
• In the case when the same income of a taxpayer gets taxed in a foreign country (with which the government of India has come to an agreement to avoid double-taxation) and also in India.
• When a taxpayer has not declared an investment which provides a tax benefit.

With filing return of income, a refund can be claimed. Every year return filing due date is 31^st July unless extended. It is required to calculate actual tax liability, to get the amount of eligible tax that one can get back as a return. Tax department refunds the extra taxes that are paid by a person more than their tax liability. To calculate the tax liability and the amount of refund that one is eligible for, an income tax calculator can be used.

What is the Time Period for Income Tax Refund?

It is processed within 2 to 6 months from the date of e-filing return. In the case of the physical filing of the return, it may take longer time. It is paid either by cheque or direct credit to the bank account.

Tax refund claiming for previous years is allowed for up to two financial years in an assessment year.

How to check Income Tax Refund Status?

One can check their refund status, after visiting the website https://tin.tin.nsdl.com. By entering the PAN and relevant Assessment Year, one can see their refund status. You may also access the details of refund payment reflected in Form 26AS in Tax Credit Statement.

List of refund status which one can find on the TIN website of the Income Tax Department

In case refund status shows that refund has expired:

Validity period, regarding refund to be presented as payment, is 90 days. After the said period, it is marked as expired and cancelled.

Steps to be taken:

• Concerned Assessing Office should be contacted if the return has been paper-filed.
• In case returns were e-filed, the following procedure is required to be followed:
• One should visit the e-filing portal of Income Tax Department
• Log in with your user id and password.
• Go to “My Account” tab and then select “Refund Re-issue Request” from the drop-down menu.
• It is required to fill up all the details to raise a request for refund re-issue.

When status shows that refund has returned:

Where refund sent by the speed post has returned undelivered then the refund is cancelled and retained at CMP centre.

Steps to be taken:

• Concerned Assessing Office should be contacted if the return has been paper-filed.
• In case returns were e-filed, the above mentioned procedure is required to be followed.

Refund status shows that refund was processed through a direct credit mode which had failed:

It will appear in case of refund for the credit to the account has failed. Reasons are as follows:

• The account has been closed.
• Operations in the account have been stopped or restricted or on hold.
• The account could be a Fixed Deposit or Loan or PPF account.
• The account may be an NRI account.
• The account holder may be deceased.

Steps to be taken:

• If returns have been paper-filed then the correct account number and IFSC/MICR code are required to be provided to the concerned Assessing Officer. After the information is updated, Assessing Officer will reinitiate refund.
• In case returns were e-filed, the above mentioned procedure is required to be followed.

In case refund status shows that refund has been paid and you have received the ECS refund advice but your account has not been credited yet:

It may be due to the wrong account information used by the bank to transfer the amount or a delay in credit to the bank account on the part of the bank.

Steps to be taken:

The account number is required to be checked and the IFSC/MICR code mentioned in the ECS advice slip carefully. In the case of correct account information then contact the bank and should enquire the status of the NEFT UTR number or the NECS sequence number displayed on the TIN website. In the case of incorrect account information then contact your bank to find out whether the amount has been credited to the wrong account.

When refund status shows that refund has been adjusted against outstanding demand of the previous year:

It will be displayed in case your refund for the current year has been adjusted against the outstanding demand of the previous Assessment Year.

Steps to be taken:

• Details should be verified mentioned on the ECS advice. If returns have been paper-filed, then the details of the outstanding demand can be obtained by contacting the Ward Assessing Officer.
• In case returns were e-filed, the following procedure is required to be followed:
• Log into your account and select “Submit Grievance” under the tab “Helpdesk”.
• Now choose to make an inquiry about refund status.

When refund status shows that refund was processed through NECS/NEFT mode which has failed:

Refund processed through NECS/NEFT mode has failed.

Steps to be taken:

Your account details should be verified at the time of filing your tax return.

Concerned Assessing Office should be contacted if the return has been paper-filed for modification in the account details and raise refund reissue request.

In case returns have been e-filed, then:

1. Log into your account on the e-filing portal of Income Tax Authority at https://incometaxindiaefiling.gov.in and then select the tab “My Profile” under “Profile Settings”
2. Make the required changes in profile.
3. After this, a refund re-issue request can be raised by following the steps mentioned.

In case the return has been filed and refund claimed but not received:

In case income tax return has been filed and a refund is due but not yet received then first you need to login to the Income Tax website and log into ‘My Account-My returns/Form’ to know the status. There may be chances that person does not receive a refund in case contact details or bank account number or the postal address is incorrect or in the case of person was unavailable at home when the cheque was delivered.

One can make the Income Tax refund re-issue request online on the e-filing portal in case refund cheque expires.

Income Tax Refund Taxability

It is not taxable because the refund is only the receipt of excess taxes, not the earned income. In case interest has been received on tax then interest portion shall be taxable according to the slab rates.

Tax refund arises in the case of excess deduction of taxes from the salary. It can happen when the person failed to declare investments made by them.

How to raise Income tax-refund Reissue Request?

In the case of refund re-issue request then it is required to log into ‘My Account-Refund Re-issue Request’ and provide the required details for the mode of payment like the ECS or a cheque or a corrected address.

This is required to be done when the refund is returned due to the error in bank details, address when the cheque is received through post. Status can be checked after 2-3 weeks of the return being filed and a refund can be received within 4-6 months.

Do I earn interest on Income Tax Refund Amount?

A person is eligible for interest on refund payable. It is calculated as 0.5% per month or 6% per year from the first day of assessment year till the date when the refund is paid. For the purpose of calculating interest, part of the month is considered as a full month. Interest is payable only when the due amount is more than 10% of the tax payable by the taxpayer.

A person can claim a tax refund even if a person has filed a belated tax return. In case of any discrepancy in the interest computation, you can raise an online request for rectifying the same.

Conclusion

Always make sure to provide correct details so that you receive income tax refund without any delay or hassle. Also beware of scam emails which ask you to reveal your confidential details to claim refund of income tax. Always verify the credentials before you proceed.

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