Most often than not, a TDS is deducted from your salary and other incomes and deposited to the Government on your behalf. This TDS deduction is based on the estimated tax liability that you might incur in a financial year. In some cases, the TDS rate is specified irrespective of your tax liability. However, when the financial year comes to an end, you can calculate the actual tax liability on your income. If the actual tax liability is lower than the TDS already deposited, you become eligible to claim an income tax refund. Similarly, if you pay an advance tax and the tax paid is more than the actual liability, and income tax refund becomes applicable.
What is an income tax refund?
When the tax paid on your behalf exceeds the tax that is actually payable, the income tax department refunds the excess tax that has been paid. This is called an income tax refund.
For example, say, every month, 30% TDS is deducted from your salary and deposited with the income tax department. The total TDS deposited amounts to INR 5 lakh. At the end of the year when you draw up your income tax returns, you find that the actual tax liability amounts to INR 4.75 lakhs. So, in this case, you would get an income tax refund of INR 25,000 when you file your ITR.
Eligibility parameters for income tax refund
You are eligible for receiving an income tax refund if any of the following parameters are met –
- If the aggregate TDS deducted on your salary is more than the tax liability assessed at the end of the year
- If the TDS is deducted on any interest income earned and your taxable income is below the threshold limit
- If TDS was deducted from any other income and your taxable income is below the threshold limit
- If you have paid a higher amount of advance tax than your actual tax liability
- If you are an NRI and your income is taxable in another country that has a Double Taxation Avoidance Agreement (DTAA) with India, you can claim a refund of the TDS deducted on Indian income.
How to check your income tax refund status?
The income tax department has adopted the online mode for simplifying tax filing in India. You can not only file your income tax online, but you can also track income tax refund status online. You can use either the online income tax portal or the NSDL website to track income tax refund status online in simple steps.
How to get an income tax refund in India?
You can get an ITR refund by filing your taxes on the online portal of the income tax department. You would have to log into your online tax account with your user ID and password. Thereafter, calculate and file your income tax return. When you calculate the return, the TDS already deposited is taken into account. Thereafter, you can calculate the income tax liability. Once the tax liability is determined, it is matched against the tax already paid. If the liability is lower, you automatically become eligible to get an income tax refund. The portal records the refund status and the amount and processes your ITR.
How to check income tax refund through the e-filing website?
The e-filing website of the income tax department can be used to track income tax refund. Here are the steps using which you can track ITR refund through the website –
- Log into your account with your user ID and password
- Your registered date of birth or date of incorporation of the firm would also be needed when logging in.
- You would have to enter the captcha code to complete the login process
- Once logged in, go to ‘My Account’
- Click on ‘Refund/Demand Status’ and submit
- Thereafter, you would be able to check the assessment year for which the refund has been claimed, the status of the refund, the reason for the failure of refund (if applicable), the mode of payment of the refund
How to check income tax refund through the NSDL website?
The NSDL website also allows you to track ITR refunds. To do so, the process is as follows
- Visit the website at https://tin.tin.nsdl.com/oltas/refundstatuslogin.html
- Provide your PAN number and select the assessment year whose refund status you want to track
- Enter the captcha code and click on ‘Proceed’
- The refund status page would open which would show whether the refund has been credited or not. If credited, the mode of payment, reference number and the date of payment would be displayed. If not credited, it would show that the refund is being processed.
Claiming income tax refund using Form 16 and Form 30
You have to declare your tax-saving investments and exemptions in Form 16 when you are filing your ITR. This helps in figuring out if you are eligible to receive an income tax refund. However, if you fail to declare your tax-saving investments and expenses in Form 16 when filing your ITR, you can use Form 30 to claim an income tax refund.
As per Section 139 of the Income Tax Act, 1961, Form 30 is a request made to the income tax department to check your ITR and pay the applicable income tax refund. It is a claim for a refund and should be submitted to the income tax department before the end of the financial year.
Different types of income tax refund status – meaning and steps to claim the refund
The income tax refund status can be of different types. Each type has a specific meaning and you need to follow specific steps to get the excess tax refunded back. So, let’s understand the different types of income tax refund status, their meaning and what you need to do for each –
|Type of refund status||What does it mean?||What you should do?|
|Refund paid||It means that your income tax return filing has been processed by the income tax department and the applicable amount of refund has been credited to you||You should check your bank account to find out if the refund amount has been credited or not. If it is not credited, talk to the bank to find out the reason why.|
|No demand, no refund||This means that you are not eligible for an income tax refund. It also means that you are not eligible to be taxed||Check the comparison that the income tax department has sent to you if you have claimed for an income tax refund. If there is an error, file a correct ITR to get the refund|
|Refund unpaid||This means that the income tax department has accepted your ITR refund. However, the payment has not been done either due to a mistake in bank account details or in your registered address||In either of the cases of mistake, rectify the mistake and update the same on the income tax website. Thereafter, raise a refund reissue request to get the ITR refund|
|Refund status not determined||This means that the income tax department has not yet processed your ITR||You should recheck the status after a few days|
|Refund determined and sent out to the refund banker||It means that the income tax department has processed your ITR, identified your refund and your refund banker was informed about the same||You should wait for the refund to be deposited into your bank account. You can also contact the bank to track ITR refund status|
|Demand determined||This means that the tax liability that you had calculated does not match with the calculation of the income tax department. Moreover, as per the calculation of the income tax department, you are liable to pay an additional tax||You should use the provisions of Section 143 (1) to check calculation errors. If there is an error on your part, pay the additional tax to the income tax department within the specified timeframe. If, however, there is no error, you should file a rectification and submit all supporting documents and proof that establish the income tax refund|
|Rectification processed, refund determined and sent to the refund banker||It means that the income tax department has accepted the rectification that you have filed. It also shows that the department has recalculated your ITR refund and sent the refund amount to the refund banker||You should check your bank account to confirm the refund is being credited. If the refund is yet to be credited, talk to the bank or wait for a few days for the same|
|Rectification processed and demand determined||This shows that the income tax department has accepted and processed your rectification. However, an additional tax liability has been determined by the department and you should pay the tax within the stipulated time||You should cross-verify all the details of your ITR and then pay the outstanding tax liability within the specified time|
|Rectification processed. No demand and no refund||This means that the income tax department has accepted and processed the rectification you submitted. Moreover, it also states that you are not eligible for any income tax refund nor for the payment of any additional tax||You are not required to take any action in this case|
How is the income tax refund paid by the income tax department?
The income tax department can pay the income tax refund in various ways. These ways are as follows
- Online through RTGS or NEFT
This is, by far, the most common way of paying the income tax refund. The income tax department directly credits your registered bank account with the refund amount.
- Offline through cheques
Another alternative that is available is to get the ITR refund through a cheque. The income tax department draws up a cheque and issues it in the name of the taxpayer. The cheque, however, is an account payee cheque only that can be encashed only by depositing it in your bank account.
What should you do if your refund is not processed?
Though the income tax department processes your income tax refund quite efficiently, there might be times when your refund processing is delayed or not done. A few reasons for the delay in processing your income tax refund are as follows –
- Your ITR verification is pending. Try and verify your ITR within 120 days to expedite the refund
- Your ITR is incomplete or not filed correctly
- The income tax department has your old bank account and the new account is not yet registered
- If the income tax department believes that you are not reporting your income correctly, it might scrutinize your ITR. In such cases, any refund, if applicable would be delayed till after the scrutiny is successfully done
In such cases, when your ITR refund is not processed, you can contact the income tax department to find the reasons for the same
Requesting for a refund reissue
If your income tax refund is not successfully processed due to wrong bank details, the income tax department or the refund banker would intimate you about the same. After receiving such intimation, you can file a request for a refund reissue. To do so, here are the steps
- Visit the e-filing portal of the income tax department and log into your online account
- After logging in, go to ‘My Account’ and then choose ‘Service Request’
- Select ‘New Request’ and then enter the request as ‘Refund issue’
- Choose the assessment year for which the reissue of refund is being placed. Also, enter the reference number mentioned in the intimation sent by the income tax department or the refund banker
- Enter in the refund sequent number
- Choose the mode of refund payment and enter the current bank account number of getting a direct credit of the refund amount
Interest on the delay of income tax refund
If the income tax department delays the payment of the ITR refund, it is liable to pay interest for the delay as specified under the provisions of Section 244A of the Income Tax Act, 1961. The interest would be paid @0.50% per month or part thereof on the outstanding amount of refund. The interest would be payable only in cases where the refund is due to excess payment of advance tax or due to TDS deductions. Calculation of the interest would start from 1st April of the assessment year and would continue till the refund is actually credited to your bank account.
Setting off outstanding taxes against the income tax refund
If you have an income tax liability as well as a refund due to you, you can request the Assessing Officer to set off the outstanding tax liability against the ITR refund. The Assessing Officer would, then, set off your tax liability at his/her discretion and it would reduce or nullify the refund that you are eligible to receive.
Ways of saving taxes on income
You can claim an income tax refund if you plan your taxes wisely. There are various avenues that allow you to reduce your taxable income. As your taxable income is reduced, your tax liability would also be reduced. If a higher TDS has been deducted or if you have paid a higher amount of advance tax, you would become eligible to claim an income tax refund. So, here are the ways in which you can save taxes on income and try to claim a refund
- Invest in a life insurance policy for financial security as well as tax-saving. Premiums paid are allowed as a deduction from your taxable income under Section 80C. The benefits received are also tax-free subject to certain terms and conditions.
- Invest in a health insurance plan too. Its premiums are allowed as a deduction under Section 80D. You can claim a deduction of up to INR 1 lakh if you invest in a health plan for yourself and your parents.
- Invest in ELSS schemes for wealth creation and tax saving. ELSS are mutual fund schemes that not only allow attractive returns but also help you claim a deduction on your investment under Section 80C.
- Use home loan repayments to claim tax deductions and exemptions under Section 80C, Section 24(b) and Section 80EEA.
- You can also explore other tax-saving avenues like PPF, EPF, NPS, 5-year FDs, SSY, SCSS, etc. to save taxes.
The refund that you receive is already a part of your taxable income. As such, it is not subject to tax
You can claim a refund only if you file your ITR. Even though your taxable income is below the threshold limit, you need to file an ITR to claim the income tax refund
You can still file your ITR refund even after the due date has expired. Such a filing would be called a belated filing and you can do so till the end of the assessment year.
Usually, the income tax refund is payable only to the taxpayer eligible for the same. However, in certain instances, the refund can be credited to another individual. These instances are as follows
- If your income is included in the income of another individual, the income tax refund would be paid to the other person
- If the taxpayer dies, becomes incapacitated, or in the event of liquidation, insolvency and the like, the amount of income tax refund would be paid to the nominee, legal heirs, guardians, trustees, legal representatives, etc. as the case may be.