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

If the actual tax paid by a taxpayer to the government is cumulatively more than the TDS, self-assessment tax and the advance tax, then that taxpayer is eligible to get an income tax refund.

How Income Tax Refund Is Processed

Once Income tax return is filed by the taxpayer, it is processed by the IT (Income tax) authorities at CPC, Centralized Processing Centre in Bengaluru. While processing the income tax return forms, if any tax reimbursement is payable to the taxpayer, the income tax refund orders are generated and transferred to the IT refund banker.

How is the payment of Income Tax Refund done?

Usually, the Income-tax refund amount is credited directly in the taxpayer’s bank account based on the details furnished by the taxpayer in the Income tax return. In addition to the account transfer, the tax refund can also be paid to a taxpayer by:

Direct Credit of Income Tax Refund:

Income tax refunds are paid either directly through NECS/RTGS or by via a cheque. Make sure that you mention complete account details – bank account number, IFSC of the bank branch and your communication address. It will enable easy transfer of income tax refunds directly to your bank account.

Income Tax Refund through a Cheque:

In case your bank account details are unclear or improper, the refund is paid through a cheque to the a/c number mentioned in the income tax return.

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.

How to Check Income Tax Refund?

  • You can easily check your Income tax refund status online on TIN-NSDL website.
  • Once on the website, you will need to login using your PAN card number and the year of assessment to check your Income tax status.
  • Once the income tax refund is processed by the IT authorities and sent to the refund banker, income tax status will reflect on their site within 10 days.

Checking Income Tax Refund Status on the E-Filing Website?

Here’s the process of checking the Income Tax Status on the e-filing website of the income tax department of India:

  1. First things first, log on the official website of the income tax department of India (www.incometaxindiaefiling.gov.in) 
    2. Now, enter your PAN number, DOB, and password. Carefully verify the captcha code to log in to your income tax account.
    3. Once you’re login to the website, click on the View Returns/Forms tab!
    4. From the drop-down menu, select the Income Tax Returns option and pick the tax assessment year to check your income tax status.
    5. Now click on your acknowledgment number.
    6. A pop-up will appear on the screen. This pop-up will show you the entire timeline of income tax e-filing, right from the date when you filed the ITR to the date of verification/e-verification and the date when your income tax return was finally processed and the income tax refund was issued.

Checking Income Tax Refund Status on TIN/NSDL Website

National Securities Depository Limited (NSDL) governs The Tax Information Network (TIN) on the behalf of the Income Tax Department of India. TIN acts as the repository of countrywide tax-related information.

  1. Visit their website and click on the services section. Then, click on Income Tax Refund Status.
  2. Now enter your PAN number and select the year of tax assessment from the drop-down menu. Now, verify the Captcha code.
  3. Now hit the submit button. You will now be able to see your Income-tax refund status.

Income Tax Refund Claim Procedure

  1. If you want to claim the excess tax paid during a fiscal year, you can claim your tax refund while filing your ITR for that particular year. Remember, it is important to file your ITR before 31ST July, every fiscal year.
  2. You can easily file your ITR by uploading the java utility form or excel sheet with all the required information in the online forms (if only you are eligible to file ITR 4 or ITR 1 form).
  3. After filling the relevant ITR form, you need to click on the ‘validate’ This button is available on the verification sheet. Your tax refund will be then automatically calculated based on the data filled by you in the sheet. And your income tax status will be shown on the screen.
  4. The total amount that reflect as the ‘refund’. This is the amount that you may claim as your income tax refund. The refund amount is then calculated by the IT department, after processing your ITR form and the verification of your refund claim.
  5. Once the claim is processed, intimation is sent to you. Usually, the intimation shows up as one of the below mentioned messages:
  • Your ITR matches with the Income-tax department and you don’t need to pay any tax further for the current fiscal year.
  • Your tax calculation doesn’t match the income tax department and you are required to pay the tax demand”e. the additional tax.” Or it may read as “Your income tax refund claim has been accepted partially”, or “Your income tax refund claim has been rejected.
  • If your income-tax refund calculation matches with the calculation of the income tax department, then your refund claim will be accepted.
  1. You will receive intimation over your registered email address, in case you’ve e-filed income tax returns. In addition, you will receive SMS message stating that the ITR for your PAN Card Number and Acknowledgement Number has been processed.
  2. In case the Income-tax department requires more information or if your case is under scrutiny, you will receive a notice from the income tax department under a different section instead of section 143(1).

What are the Different types of Income Tax Refund Status? 

  1. Not Determined- It implies that your ITR has not been processed and you need to check your income tax status after a few days.
  2. Refund Paid- It implies that your income tax refund has been sent to you by a cheque or has been credited to your bank account.
  3. Refund Failed: This status appears when the refund amount could not be credited to your bank account because of improper bank details, etc.
  4. Refund Expired- The refund cheque issued by the Income-tax department is valid for a period of 90 days. If it expires, then you will have to get a refund cheque re-issued in your name.
  5. The Cheque has been Encashed- This message reflects when the cheque sent by the IT department has been received by you and has been encashed.
  6. Refund Returned - In case the cheque is sent back or returned to the Income-tax department, this status appears. In such cases, your refund will be canceled and you will have to send a request to re-issue your income tax refund.
  7. Refund Adjusted against Last Year’s Outstanding Demand- In case you have a pending tax demand from the income tax department for the antecedent fiscal year, your income tax refund may get adjusted against your income tax refund. Before adjusting your income tax refund against last year’s tax demand, the income tax department sends an intimation notifying the same to the taxpayer.

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.

FAQs for Income Tax Refund Status

Question 1: What is income tax refund?

Answer: When the taxes you have paid are more than that actual taxable amount, it is refunded back to the taxpayer by the Income Tax Department after processing of ITR. This refund is referred to as the income tax refund.

Question 2: Where can I check my tax refund status?

Answer: You can check your income tax refund status on the official website of the Income tax department or TIN/NSDL site.

Question 3: Is it important to file Income Tax returns to get back the excess tax paid?

Answer: The answer is yes! As per the provisions of the Income Tax Act 1961, taxpayers are required to file their return in the relevant assessment year before or by July 31st of that particular year to claim their income tax refund.

Question 4: Does Income tax refund get credited back directly to the bank account?

Answer: If the income tax refund amount is less than Rs. 50,000, it is credited back to the taxpayers’ bank account. However, if the tax refund amount is more than Rs. 50,000, a refund cheque is issued and sent to the taxpayers’ communication address.

Question 5: When is Income Tax Department liable to pay interest on Income Tax refunds?

Answer: Taxpayers are entitled to earn interest at the rate of 0.5% every month for the time-period between April 1 of the assessment year and the date of issue of the refund. This is applicable for only in the cases where refund has been claimed due to advance tax payment or extra tax deducted at the source. But here it is important to remember that no interest is paid to the taxpayers if the total refund amount is less than 10% of the total taxes paid.

  1. Refund of Excess TDS/ TCS/ Advance tax paid: In this case, the interest is calculated @ 1. percent per month/ part of the month
  2. Refund of Extra Self-Assessment Income Tax Paid: In this case, the interest is calculated @ 1.5% per month/part of the month). It is calculated for the period between the date when the tax was paid or the date when the ITR was filed and the date when the refund was issued.

Question 6: Are there any taxes/interests charged on the income tax refund generated by the Income Tax Department?

Answer: No! There are no interest/ on the Income Tax Refund. Only, the interest earned on IT refunds is considered as an income from other sources, therefore it is taxable.

Question 7: What should I do if my tax processing fails due to incorrect bank details?

In case you receive intimation from the IT department that you income tax processing has failed due to incorrect bank details, here’s what you must do:

  • Visit the Income-tax department’s official site and submit your Income tax refund re-issue request and update your new or correct bank account number.
  • Once you log into the site, Go to My Account, then click on Service Request tab and select New Request
  • Click on Refund Reissue option
  • Now select the year of assessment
  • Submit your Refund Sequence No. and CPC Communication Reference No.
  • Update your bank account details after selecting the mode of Income tax refund
  • The above information is available in the intimation u/s 143(1). If you do not have it, then you can request for it online. Go to My Account and click on Request for intimation u/s 143(1)
  • Once the request is submitted, the refund amount will be credited in your bank account

Question 8: Where can I contact the Income Tax Department for any queries related to my income tax refund?

Answer: You can call at their helpline number i.e. 1800 103 4455 (or) +91-80-46605200. It remains open for tax-related queries from Monday to Friday between 8:00 am and 8:00 pm.

Question 9:  Why have I received an email from The Income Tax Department stating that my refund has been adjusted against a previous demand?

Answer: This means that you did not pay your income tax in entirety in the previous fiscal year. And your income tax refund for this year was adjusted against the tax demand for the last year. Intimation under section 245 is sent by the income tax authorities to inform you that your outstanding tax demand will be adjusted from the refund due. However, you can always choose to disagree with the offer.

Question 10: How can I check the status of my income tax refund reissue request?

Answer: Here’s how you can do it -

  1. Firstly, login to the e-filing website of the Income-tax department
  2. Then click on My Account and then go to the Service Request option
  3. Now choose the New Request option and click on refund reissue
  4. And then submit

Question 11: When does Income tax department send a rectification notice u/s 154?

Answer: In case the Income-tax department finds apparent mistakes in the ITR processed, then it may issue a notice u/s 154 of the Income Tax Act. It is basically a rectification order highlighting any clerical errors, misreading any provision of the Act etc. You can request for rectification online at www.incometaxindiaefiling.gov[dot]in

Question 12: What should I do if I do not receive my Income Tax refund within the stipulated time?     

Answer: In case you do not receive your refund amount within a reasonable time, you need to check if your UTR has been verified or not. ITR is processed only when it has been verified or ITR V is sent to the Centralized Processing Centre, Bengaluru.

In case, the verification has been done, but still, it is delayed, you should follow up with the CPC of the Income tax dept.

if you have filed your previous ITR manually, then you can write a letter (with ITR copies) to the Jurisdictional Assessing Officer.

Question 14: What to do when the income tax is deducted from the salary but tax payable is lesser than the TDS amount at the end of the year?

Answer: In such a situation, you can claim the refund of the excess amount of TDS that is deducted from your salary by filing ITR.

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