Income Tax Refund - Basics, Process

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Income Tax Refund

Many people are very ignorant about their income tax refunds. Even people are unaware that they can check status of their income tax refund online. It is very easy to check you income tax refund online as you just need your permanent account number and the assessment year on the site to access the current position of the tax refund. The tax refunds whenever applicable are made in two different means to all the tax payers:

  • RTGS / NECS: In order to enable direct credit of the refund amount to the bank account of the tax payer, the taxpayer's correct bank A/c (at least 10 digits), MICR/ IFSC code of the bank branch and required communication address is mandatory.
  • Paper cheque: The standard paper cheques wherever issued require the current bank account no and the correct address of the tax payer as mandatory information.

How to Check Income Tax Refund Status Online?

An online facility to track the Income Tax Refund status is offered by the Income Tax Department.

Taxpayers can check the status of their refund 10 days after they send the refund. You will be required to enter your PAN number and choose the year of assessment to track.

You will have to finish with the e-filing process to obtain your Income Tax Refund.

In order to check your Income Tax Refund Status Online, you are required to follow the steps below:

Step 1: Log in to the official website of e-filing with User ID, Date of Birth or Date of Incorporation, Password and Captcha.

Step 2: Visit ‘My Account’ and click on ‘Refund/Demand Status’.

Step 3: The details below will be displayed:

  • Assessment Year
  • Status
  • Reason (For failure of refund, if any)
  • Mode of payment

How To Claim Income Tax Refund?

 “Death, taxes and childbirth! There's never any convenient time for any of them.” 
    ― Margaret Mitchell

It doesn’t matter how inconvenient it is for all of us to pay taxes, but getting a tax refund is something we all eagerly look forward to. In fact, many of us view it as a bonus paid by the government.

However, the irony here is that it’s your own money that you overpaid as taxes, and now have to claim by filing a tax refund.

Quite often, most people end up paying taxes that are higher than their liability, making them eligible for tax refunds. Although, the IT department has fixed the tax rates for individuals based on their income slabs, people often end up paying excess tax due to various reasons.

Sometimes, it might be due to them failing to make their investment declarations on time, or because taxes paid in advance due to an anticipation of a hike in income which didn’t materialize, etc. Besides these obvious reasons, there are also some other scenarios where tax may be deducted from your investment sources such as Fixed Deposits, etc.

The Income Tax Department allows such people to claim a refund for the extra tax we have paid, which is known as Income Tax Return (ITR). Since one’s hard-earned money is at stake, it is really important for one to be clear on the whole process of how to claim her/his tax refund from the Income Tax department.

In this article, we will discuss the process to claim income tax refunds.

1. Always Remember the ITR (Income Tax Returns) Filing Date

One can claim her/his income tax refunds while filing her/his ITR for that particular financial year. Usually, the deadline for filing the ITR is July 31st of every financial year. One should try to avoid the last minute rush and file her/his ITR well before the given deadline. It is best to avoid any hassles when the deadline is close.

2. Keep all the important documents handy

It’s always recommended to keep all the required documents handy before you start the process of your ITR filing. This list of relevant documents includes salary statements, bank statements, business income statements (for businessmen), Form 16 (either from your employer/bank) to support your investment, other investment proofs and supporting documents, interest paid certificates, 26AS tax credit extract, etc.

3. File your Income Tax Returns (ITR) 

The next step is to, finally, file the ITR. To file your Income Tax Returns, you have to start by filling up a form where you are required to fill-in details such as your name, address, your gross salary, your taxable income, TDS (if applicable), refund due, total due, etc.

This form will record all your financial information for that particular financial year. You can always seek help from a financial advisor/Chartered Accountant to file the ITR on your behalf. Or else, you can do it yourself as the form is self-explanatory.

4. Know your refund amount 

After submitting the form, you can find out how much refund you’re entitled to in the refund column. To get an idea of your refund amount, you need to, first, click on the ‘Validate’ option, which is available on the ‘Taxes Paid and Verification’ page. Note down your refund amount and also save a copy of the ITR-Verification receipt generated.

5. Send the ITR-V receipt to the Income Tax Department, Bangalore 

The amount displayed in the refund column is what you need are entitled to. To get the refund of this amount, you need to sign the ITR-V receipt and post it to the Income Tax office. The address of the Income Tax office is already mentioned on the form.

6. Getting your ITR refund 

Once your ITR-V form reaches the income tax office, you will receive a text message notification from them. However, please be careful and accurate, as the IT department will cross-check the figure sent by you.

Once they have verified the amount, they will process your application and the amount will be credited to your bank account. In case they find a discrepancy between the amount shared by you and the amount calculated by them, your application will be rejected.

You will be notified in either of the cases. All the proceedings will be communicated to you, by text message and/or email on your registered phone number and email address, respectively. The refund can take anything from 1 month to 4 months to get credited to your bank account.

In what different ways can claiming your income tax returns help you?

  • It helps you get loans easily and smoothly, as almost all the major banks ask for a copy of your tax returns before processing your loan request. 
  • Visa processing is one another benefit associated with ITR filing. Most foreign consulates ask candidates to present their ITR receipts (of at least the past 3 years) when they appear for the visa interview, especially if one is travelling to the UK, US, Europe or Canada. 

Producing your ITR receipt shows that you have a steady source of income in India and hence, there are strong chances that you will return to the country for good. 

Your ITR-V receipt also helps you buy a life cover, if you are planning to buy one in the range of Rs 50 lakhs or more. This is because; your income is one of the most important deciding factors for the insurance companies to calculate the sum insured of your term cover.

INCOME TAX- REFUND PROCESS

Most of us wait for the last moments to make our tax investments which leads to incorrect disclosure of investments and further you end up paying more taxes. This extra income tax paid in addition to actual tax liability leads to a situation of tax refund. The process of tax refunds has been a time consuming process over the years. The whole process going online even has not helped a great deal. But if you are expecting a tax refund then it is important to take a few steps which will help you in expediting the process. You can check and provide accurate bank account details like bank account number and also the proper address to get the tax refund directly credited to your account.

In case of excess deduction of tax at source, claim of refund of such excess Tax deduction at source (TDS) can be made by the deductor. The excess amount is refundable as per procedure laid down for refund of Tax deduction at source (TDS) .The difference between the actual payment made by the deductor and the tax deducted at source or deductible, whichever is more will be treated as the excess payment made. This amount is to be first adjusted against any existing tax liability under any of the Direct Tax Acts. After meeting such liability, the balance amount is to be refunded. Below is the tax refund process:

  • Filing the return on time is the first and foremost requirement for claiming the Tax refund, by providing the adequate investment details.
  • File your return online so that it is processed faster and it doesn’t have to deal with bureaucracy.
  • Check your Income tax return status to see if it’s reflecting the tax refund correctly.
  • If your Tax return shows Tax refund, filing the return is all you need to do. The IT department will send the refund by post (cheque) or direct credit to your bank account.
  • You should provide proper details of bank account like MICR Code, bank account number and also the proper address to get the Tax refund amount directly credited in to your account.

Opt for direct credit so that you don’t have to deal with postal delays.

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