Every year we all file income tax returns (ITRs), but most of us are not sure how the process of claiming income tax refund works. For the 2018-19 fiscal year, the last ITR filing date was extended by one month from July 31, 2019 to August 31, 2019.
You are eligible to receive an income tax refund when you have paid more taxes to the government than your actual tax liability. This generally occurs when the taxpayer’s advance tax, self-assessment tax paid, or deducted TDS is higher than a taxpayer’s total tax liability.
Process for claiming income tax refund
A person can claim reimbursement of excess taxes paid / deducted during a financial year by filing their tax returns for that year. Under the Income Tax Law, a person is required to file their return in the applicable assessment year before July 31 (unless the deadline is extended) to claim the refund. The fiscal year immediately following a financial year is the relevant assessment year (AY) for that fiscal year.
A person can file their return either by uploading the full excel / java utility form or by providing the required data on the online forms (only for those eligible to file the ITR 1 or ITR 4 form). This year, the tax department has started providing pre-filled ITRs on the online platform. The ITR form is completed with information about salary income, interest income (in case TDS is deducted) and other details. If you are presenting ITR with the Excel utility, you can download an XML file to pre-populate your ITR.
Refund ITR claimed programs submitted by you
Once you complete the full ITR form applicable to you and click the validation button on the ‘Tax paid and verification’ sheet, the system will automatically calculate your refund (based on data entered by you) and the Refund amount will appear in the ‘Refund’ row as shown in the image below.
This is the amount of the refund claimed by you and not necessarily what is accepted and paid by the IT department. The amount of the refund, if any, you will be paid will be decided by the IT department after processing your return. Once you submit and verify your ITR, the I-T department will process it and verify the authenticity of the claim made.
Remember this year, you must make sure that the bank account in which you want to receive the refund amount is previously validated. The tax department has previously announced that they will issue electronic refunds to the bank accounts that the PAN is linked to and are previously validated on the electronic filing website.
After the processing of the return, you will be sent a notice according to the result of the processing. In most cases, an indication under section 143 (1) is sent to you showing any of the following: (a) That your tax calculation matches that of the tax department and that you are not required to pay any additional tax ( b) That your calculation does not coincide with that of the tax department and there is an additional tax (called tax claim) payable by you or your claim for refund is rejected or partially accepted, that is, reducing the amount. (c) That its calculation coincides with that of the tax department and the refund claim is accepted by it.
In the case of electronically filed returns, the information is sent to you by email. When this email is sent, usually an sms indicating that your ITR is being processed is also sent to your registered mobile phone number. In case the department wants more information or your case is picked up for scrutiny, a notice may be sent to you in a different section instead of section 143 (1).
In the event that the refund is accepted due to you, the information also indicates the amount of the refund payable. The department provides the refund reference number. One can track the status of their refund by logging into the Electronic Income Tax Filing website and clicking on the Refund / Claim Status on the ‘My Account’ tab.
Alternatively, one can track the status of the refund by visiting: https://tin.tin.nsdl.com/oltas/refundstatuslogin.html
The website is very easy to use, as it only requires PAN and evaluation year information to check the status of the refund. The department has designated the State Bank of India to pay refunds by check or direct credit to the taxpayer’s account. It is recommended that you mention the correct bank details on your ITR form to obtain a timely payment from the department. The ITR has a specific row to fill in the details of the bank account you want the refund credited to, if applicable, (see image below). The refund, if accepted as overdue, will normally be credited directly to the bank account you provided for this purpose on your tax return.
Interest on Refund
If the refund is due to a taxpayer, section 244A states that interest will be payable to the taxpayer / advisor subject to certain terms and conditions. Interest on repayment is payable to an advisor if the following terms and conditions are met: – If the return is filed on or before the due date, that is, on July 31 of the fiscal year corresponding to the fiscal year for which the statement was filed.
- Archit Gupta, Founder and CEO, ClearTax.com says “The period for calculating interest on repayment is based on the mode of tax payment:
When the refund is for the overpayment of the advance tax or TDS:
(i) if the return is presented on or before the due date, the period will be from April 1 of the relevant evaluation year until the date of granting the refund OR,
(ii) when the return is not presented on or before the due date, the period will be the date the return is presented until the date the refund is granted
- When the refund is due to excess of the self-assessment tax paid: the period will be from the date of presentation of the refund or the payment of the tax, whichever is later than the date the refund is granted.”
However, no interest will be paid if the repayment amount is less than 10 percent of the tax liability. Also, if the refund payment is delayed due to any action by the deductor, that period will be excluded from the total period for which the interest payable is calculated. It should also be remembered that the interest received on the amount of the refund is subject to tax. The counselor is required to include the interest paid to you in the refund, in your total gross income while filing the statement for the financial year in which you received it.
Interest is calculated using the simple interest method on the amount due for repayment at a rate of 0.5 percent for a month or part of the month or at 6% per year. Interest to be paid by you in case of excessive reimbursement by the department
Do you know that you can be required to pay interest on any excess refund granted by the Income Tax department?
Section 234D of the Act states that if the department during the regular evaluation of the tax return finds that the amount of the refund paid to the taxpayer is greater than the amount for which it is eligible, then they can recover it along with the interest. The regular assessment is an assessment conducted after the initial assessment. The initial evaluation is done when the return is first processed. Regular evaluation can be described as the scrutiny of the tax return filed by the tax advisor.
The interest rate received by the department is the same as the interest rate paid by the department, that is, 0.5 percent per month or 6 percent per year. The interest period is taken from the date the refund is granted until the date of the regular evaluation and is calculated using the simple interest method.
Forgot to claim a refund?
CBDT in its circular dated 06.06.2015 has clarified the rules regarding the claim for reimbursement if the taxpayer has not claimed the same when filing the tax return. The claim for reimbursement must be made using ‘Form 30’. It must be done within one year from the last day of the relevant evaluation year, that is, the AY related to the financial year for which the declaration is presented. Acceptance of the claim depends on the amount of the claim and the judgment of the tax commissioner.
Refund pending due to incorrect details
Sometimes it happens that you have filed your ITR with a claim for refund but have not received it. It may be due to the following reasons:
- Once the department has conducted the initial evaluation of your verified ITR, it has discovered that no refund should be paid to you. This will be reflected in the notice in section 143 (1) of the Income Tax Act that the tax department will send you after processing your return. Therefore, if the notice shows a refund due to you, it will be issued, but if the notice shows no refund, it means your claim for refund was not accepted as your calculations did not match those of the department.
- The department has processed your refund, but has not received it due to incorrect bank details or the check has not been received by you due to incorrect address details.
If your refund is pending due to incorrect details provided by you, you can request the department to reissue it after providing the correct bank details. You must log in to the electronic income tax filing website and submit the application for it in the ‘My account’ tab in the ‘service request’ option.
Once you have filed your ITR and verified it, regularly check the status of your return if you have made a claim for refund on the return. This helps you track your ITR processing and refund (if applicable). It also helps to verify if you have made a mistake in filing the return.