Income Tax Refund – A Comprehensive Guide

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A person can avail an income Tax Refund when his tax liability is less than actual taxes he has paid. This is issued to the taxpayer by the Tax authorities.

Who is eligible for tax refund?

There are many situations where a person becomes eligible for a tax refund:
• If the taxpayer pays more tax as a self-assessment but he is liable to pay less through a regular assessment.
• If TDS deducted by employer or the bank of the taxpayer is more than latter’s tax liability through regular assessment.
• In a scenarios where the same income of a taxpayer gets taxed in a foreign country (with which the government of India has an agreement help avoid double-taxation) and also in India.
• If the taxpayer has not declared an investment which provided a tax benefit to him.
How to get income tax refund in India?

Income Tax refund can be claimed by filing your return of income. Typically the return filing due date each year is the 31st of July, unless it is extended.

How much income tax does one get back?

To know the amount of income tax one is eligible to get back as a refund, one needs to calculate the actual tax liability. If the taxes paid by a person are more than his tax liability then the extra taxes get refunded back by the tax department. The income tax calculator can be used to find out the tax liability and the refund that one is eligible for.

How long does it take get a tax refund?

The tax refund is processed within 2 to 6 months from the date of e-filing of your return online. The refund may take longer if you file your returns physically.

How is tax refund paid?

Tax refund is paid either by cheque or through a direct credit to your bank account.

Can one claim 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
To check refund status, one can visit the website https://tin.tin.nsdl.com. After entering your PAN and relevant Assessment Year, one can see your refund status.

Given below is a list of different refund status which one can find on the TIN website of the Income Tax Department (ITD):

Your refund status says that refund had expired:
The validity period for any refund to be presented as payment is 90 days. After this period, it is marked as expired and cancelled.

Steps should one take:

  • If your return has been paper-filed, then the concerned Assessing Office should be contacted.
  • If your returns were e-filed, then follow the following procedure:
  1. You should go to the ITD’s e-filing portal at https://incometaxindiaefiling.gov.in
  2. Login with your user id and password.
  3. Go to “My Account” tab and then select “Refund Re-issue Request” from the drop down menu.
  4. Fill up all the required details to raise a request for refund re-issue.

Your status says that refund has returned:

This means that the refund sent by the speed post has returned undelivered. In such a scenario, the refund is cancelled and then retained at CMP centre.

Steps one should take:

1. If your returns have been paper filed, then the concerned Assessing Officer should be contacted.

2. If your returns have been e-filed, then follow the steps mentioned below:

1 (b).Your refund status says that the refund was processed through a direct credit mode which had failed: 

This status appears if the refund for credit to the account has failed. Some possible reasons for the failure are as follows:

1. The Account has been closed.

2. The Operations in the account have been stopped/restricted/on hold.

3. The account could be a Fixed Deposit/Loan/PPF account.

4. The account may be a NRI account.

5. The account holder may be deceased.

Steps one should take:

1. If your returns have been paper-filed, the correct account number and IFSC/MICR code needs to be provided to the concerned Assessing Officer. Once the information is updated, the Assessing Officer will reinitiate your refund.

2. If your returns have been e-filed, then follow the steps mentioned below:

1 (b).If your refund status says, paid and you have received the ECS refund advice but your account has not been credited:

This could happen due to the wrong account information being used by bank to transfer the amount or a delay in credit to your account on the part of the bank.

Steps one should take:

Check the account number and the IFSC/MICR code mentioned in the ECS advice slip carefully.

1. If the account information is correct, then contact your bank and enquire about the status of the NEFT UTR number or the NECS sequence number as displayed on the TIN website.

2. If the account information is incorrect, then contact your bank to find out if the amount has been credited into a wrong account.

Your refund status says that the refund has been adjusted against an outstanding demand of the previous year:

This status is displayed if your refund for the current year has been adjusted against an outstanding demand of the previous Assessment Year in-part or in-full.

Steps one should take:

1. The details mentioned on the ECS advice should be verified. If your returns have been paper-filed, the details of the outstanding demand can be found by contacting the Ward Assessing Officer/CPC Bangalore.

2. If your returns have been e-filed your return, then:

a.   Login to your account and select “Submit Grievance” under “Helpdesk” tab
b. Now choose to make enquiry about your refund status

Your refund status says that the refund was processed through NECS/NEFT mode which has failed:

This means that the refund processed through NECS/NEFT mode has failed.

Steps you should take:

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

1. If your returns have been paper-filed, then the concerned Assessing Officer should be contacted for modification in the account details and raise refund reissue request.

2. If the returns have been e-filed, then:

a. You can login to your account on the ITD’s e-filing portal at https://incometaxindiaefiling.gov.in and then choose the “My Profile” tab under “Profile Settings”.

b. Make the required changes in your profile.

c. Once this is done, a refund reissue request can be raised by following the steps mentioned under

1 (b).If the return has been filed and refund has been claimed but not received

If you have filed your income tax return and a refund is due but not yet received then you have to login to the Income Tax website and login to ‘My Account-My returns/Form’ to know  the status of your return. The refund could be in process since the return has not been processed by the IT department yet or the IT department has decided on a ‘no refund due’ after it gets processed. One might not receive the refund even if the contact details like the bank account number or the postal address are incorrect or if you were unavailable at home when the cheque was delivered.

What to do if the income tax refund cheque expires?

If the refund cheque expires then you can make the Income Tax refund reissue request online from the Tax e-filing portal.

Income tax helpline number and email id

If anyone has a complaint or any query regarding Income Tax Refund, then a complaint can be  registered online through Aayakar Sampark Kendra Toll Free No. 1800-180-1961 or an email  can be sent at refunds@incometaxindia.gov.in

If you wish to make any Income Tax refund enquiry regarding any modification in the refund record related to return processed at CPC Bangalore, you can call on toll free number 1800-425-2229 or 080-43456700.

If there are any payment related query, please contact SBI Contact Centre Toll Free No. 1800-425-9760.

Fill in your PAN, choose the relevant Assessment Year and enter the captcha code. Now press Submit button to see your tax refund status.

Taxability of income tax refund

The refund will not be taxable in your hands as it is only the receipt of the excess taxes and not the income earned.  The income earned is taxable and not the tax refunds.
Still, if you have received the interest on tax then this interest portion is taxable according to the slab rates that are applicable to you. This is included as the income of the year in which the refund is received.

How does a tax refund arise?

The refund of tax arises whenever there is an excess deduction of the taxes from the salary. In case of a salaried individual, this could happen when she/he have failed to declare some of the investments made by her / him which led to excess the tax deduction.

If You Have a Refund Re-issue Request

In case there is a refund re-issue request then one is needed to login to ‘My Account-Refund Re-issue Request’ and give the required details for the mode of payment like the ECS or a cheque and changed or a corrected address.
This has to be done when the refund is returned due to the error in bank details, house address or house locked when the cheque is received through post.
Refund status can be checked after 2-3 weeks of the ITR being filed and refund can be received in 4-6 months.

Is one eligible for any interest on the tax refund?

Yes one is eligible for an interest on the refund payable .The interest is calculated @0.5% per month or 6% per year from first day of the Assessment Year until the date when the refund is pay. Even a part of a month is considered as a full month for interest calculation purposes.
For example, if one has claimed an interest of Rs. 3,000 for the Assessment Year 2015-16 and received the refund in the month of February in 2016 then the interest will be calculated from April 2015 to February 2016.
Nonetheless, it should be noted here that the interest is payable only when the amount due is more than 10% of the tax payable by the tax payer.

Is it important to file the tax refund within the due date in order to claim a tax refund?

No. You can claim the tax refund even if one has filed a belated tax return.

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 on the numbers 1800 4250 0025, and 080-2650 0025. These numbers are provided on the government’s e-filing portal.

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A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.

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