What You Should Know About Income Tax Refunds

Albert Einstein once said that “The hardest thing to understand in the world is the income tax”. Its complexity is the reason that most tax payers don’t like going through the tedious procedure of filing taxes. But, the consolation of getting the benefit of income tax refunds in the end makes this process less tedious.

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Sometimes, we end up paying more taxes on our income than we’re liable to and thus, are supposed to get a refund on that extra paid tax (which is paid back by the Government). Income tax refund is a process which helps you show the taxes you have paid on your income by the end of the financial year.

Shared below are few of the key points that you need to consider before applying for tax refund:

Reasons For Excess Tax Paid:

Forgot to fill Form 15G in the case of a FD (Fixed Deposit):

If you have a fixed deposit and you have not filled the form 15G, the taxes will be deducted by the banks on the interest generated for your source. In case, your tax liability is less, as compared to the tax savings by the end of the financial year, it automatically makes you eligible for the refund.

You didn’t declare your investments in the investment declaration form in the beginning:

In every organization, the employees have to fill up an investment declaration form that will summarize their plans for the tax savings in the following financial year. Most of the times, we take it lightly and don’t fill the form as we are not clear about our tax savings plan yet. In this case, the company deducts your taxes without taking your tax savings into consideration. However, if you have start investing in different tools before the financial year comes to an end, you are supposed to get a tax refund as you have paid more taxes than you were liable to.

You work as a freelancer and you have got your TDS deducted at 10%:

There is a possibility that your clients would have been deducting 10% of your income as the TDS. Sometimes, you may have paid more taxes than you were liable to by the end of the financial year and hence are eligible for an income tax refunds.

How to File Tax and Get the Ensuing Taxes:

You can either contact a CA to file your income tax refunds or can do it on your own. Once you’ve filed your taxes using the online portal, you will get an acknowledgement slip generated. You need to sign the receipt and either post it to the mentioned address on the receipt or use the online method to verify your return. However, if you have already got your digital signature registered, you need not to worry about the e-verification procedure. You need to be very accurate about this procedure, as without this step your ITR process will remain incomplete and you won’t get any refunds on your claim.

Once the Income Tax department receives your signed receipt of acknowledgment, a thorough analysis will be done to check the authenticity of the refund. If your claim is found to be authentic, the refund will be issued within a time span of 3-4 weeks to 4-8 months. As per the new reforms, the refund will be directly credited to the bank account you have mentioned in your IT form but, you can also receive a cheque at your address from the Income Tax department in certain scenarios. A cheque is sent to the address of the tax payer if there are any technical issues with the online crediting of the refund.

What to do if you Forget to Claim the Refund?

You have to claim the refund using Form 30. In case, you have forgotten to claim the refund, you can still to do it by paying a penalty amount, within one year from the last day of the relevant assessment year. Whether your claim will be accepted or not, will depend on the judgment and analysis of the income tax commissioner and the amount you have claimed as the refund.

Reasons for Pending Refund:

  • If your claimed refund doesn’t match with the IT department’s calculations.
  • You had updated wrong bank details or address at the time of filling up the form. You can edit your details under ‘My Account’ tab on income tax e-filling website and ask the department to re-issue your claim afterwards.

It’s important to keep a regular check on the status of your claim refund. This will help you track the status of your Income Tax Returns and refunds (if applicable). It will also help you check and rectify the mistakes, if you have made any, in the ITR form.

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^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
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