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Income Tax refunds arise in those cases where the amount of tax paid by a person , directly or indirectly, is greater than the amount he is supposed to pay. This article talks about What is income tax refund? Who can claim income tax refund? How to claim income tax refund? How is income tax refund paid? How to check refund status? It also talks of Income tax refund scam where one sends mail asking for bank details.

Overview of Income Tax Refund

  • You get tax refund only when you’ve paid more taxes (either by way of TDS or Advance Tax or Self-Assessment Tax) than you’re supposed to. The tax is calculated after taking into consideration all the deductions and exemptions at the time of filing of Income Tax Return.
  • The taxpayer has to claim the income tax refund while filing ITR.
  • After e-verifying the ITR, CPC takes normally a month’s time to process the ITR. But, if you are sending ITR-V by physical means to the CPC then it may take some more time.
  • The income tax department has to process the ITR within the expiry of one year from the end of the financial year in which return was filed. Therefore, for the return filed for FY 2018-19 must be processed by March 31, 2021.
  • Once your ITR is processed, the income tax department sends you an intimation notice, under section 143(1)
  • You can Check Refund Status at Income Tax efiling website after logging in and going to My Account tab. Click on Refund/Demand status
  • Tax refunds are issued only electronically. The tax department has done with the practice of sending out refund cheques.
  • Refunds are sent directly to the taxpayer’s bank accounts. But the new rules state that refunds will be given only to bank accounts, whether savings, current, cash, or overdraft (OD) account if it is linked with Permanent Account Number (PAN) of the assessee.
  • Your bank account should be pre-validated on the income tax department’s e-filing portal. You can go to the income tax website, make a log-in using your PAN and password and then go to profile settings. There you will find an option to pre-validate your bank account.
  • If your ITR is already been verified, then the reason for not receiving your refund can be:
    • Your ITR is status still under processing:
    • Your ITR has been processed but the Income Tax Department determined: No Refund Due
    • The Return has been processed after determining the refund, but the refund could not be credited due to reasons like incorrect bank account number, incorrect postal address etc.
    • Your ITR has been processed after adjusting it with outstanding demand (if any).
  • Be careful of Income Tax Refund scam, where you may get a mail seemingly from Income Tax Department to enter bank details for the refund and then the money is withdrawn. Remember Income tax Refund comes directly to your bank account.

Income Tax Refund

What is income tax refund?

Income tax refund is the amount which the Government pays back to the taxpayer who has paid excess taxes. One may end up paying extra tax directly or indirectly. For example for a salaried individual, if an employee fails to declare tax saving investments or he does not claim HRA, his employer can end up deducting higher tax. So When the tax paid by the taxpayer is more than the required amount, he is eligible to claim the refund of the excess tax paid by him. Sections 237 to 245 of income tax deal with the provisions relating to refund of tax.

Who can claim income tax refund?

The taxpayer himself can claim the refund of excess tax paid. But if the taxpayer is not in a position to claim the same due to death, incapacity or any other reason, then his legal representative/trustee/guardian/legal heir is entitled to claim the refund.

How can one claim Income Tax Refund?

When you are eligible for income tax refund you must claim it whiling file your income tax return. No special form is to be submitted to claim the refund.  However, if you forget to claim it then you can revise your return within a specified period of time and claim the refund in the revised return. When you file the ITR if tax paid is more than tax due you would see the income tax refund amount due to you as shown in the image below. The following image shows of ITR1 in excel which has the refund of Rs 8820.

Income tax refund in ITR

Income tax refund in ITR

When is one eligible to get Income tax refund?

One is eligible for an income tax refund when

  • Your TDS( tax deducted at source) from salary, interest on securities or debentures, dividends, etc. is higher than the tax payable by you.
  • The tax you’ve paid, in advance on the basis of self-assessment is more than the tax payable on the basis of regular assessment.
  • If you have investments which offer tax benefits and deductions that you have not declared.
  • The same income is taxed in a foreign country (with which the government of India has an agreement to avoid double-taxation) and in India as well.
  • If you find, after considering the taxes you’ve paid and the deductions you are allowed, that the tax paid amount is in the negative.

For how many previous years can I claim an income tax refund?

Income Tax Return Filing is the prerequisite for getting Income Tax Refund. Earlier, Income Tax Department gave taxpayers the freedom to file the previous two years’ return but from FY 2017-18 return can only be filed till the end of the assessment year.

In case, you have refund due for the years preceding the aforesaid year and you forgot to file an income tax return for those years, then you can take respite of CBDT Circular No: 9/2015 to get a refund for previous six assessment years. This circular can be used only where; your refunds are the result of the excessive deduction/collection of tax and/or excess deposit of advance /self-assessment tax.
For taking benefit of the above circular, you need to make an application to the relevant authority depending upon the amount of refund.

Amount of claim (refund/loss) for any one assessment year Application To:
10 Lakhs or less Principal Commissioner/ Commissioner of Income Tax
More than Rs.10 Lakhs but less than Rs. 50 Lakhs Principal Chief Commissioners of Income-tax/Chief Commissioners of Income-tax
More than 50 Lakhs Central Board of Direct Taxes (CBDT)

Note: These authorities have all the powers to make necessary inquiries or scrutinize to ascertain the correctness of the claim and accept/ reject your application. Also , in this case Income Tax department shall not pay any interest on the delayed refunds.

How long does it take to get the refund?

Generally, it takes 20-45 days from the date of e-verification of your Income Tax Return to get your refund credited. However, for the returns, verified through sending of ITR-V to CPC Bengaluru, it may take some more time.

Do remember that the income tax department has to process the ITR within the expiry of one year from the end of the financial year in which return was filed. Therefore, for the return filed for FY 2018-19 must be processed by March 31, 2021

The days are gone when getting an I-T refund used to take months or in some cases even a few years. The new electronic verification e-filing system has proved to be very customer-friendly and the department is working to ensure their refunds are sent in a week’s time or a maximum of ten days. Our article E-verification of Income Tax Returns and Generating EVC through Aadhaar, Net Banking talks about how to e Verify.

In 2015, the income tax department received 2.06 crore returns on its e-filing portal as on September 7, 2015 (last date for ITR filing), which is an increase of 26.12 per cent over AY 2014-15 when 1.63 crore returns were filed online. The department’s Central Processing Centre (CPC) as on September 7 processed 45.18 lakh returns and issued refunds to 22.14 lakh tax payers relating to assessment year 2015-16.During this period, the department electronically verified over 32.95 lakh e-returns.

As a user on Income tax e-filing website said on 29-07-2016, “It has been good experience to fill ITR first time in life time that too with out consulting anybody .very simple and also refunded extra tax with in 15 days ,Great job by E-ITR.”

Processing of income-tax returns by the Income-tax department (whether CPC or by jurisdictional officers) is done under section 143(1) of the Income-tax Act. As per this section, the time limit is one year from the end of the financial year in which the return of income is filed. Therefore, for example, if you have filed the return of income for Assessment Year 2018-19 (Financial Year 2017-18) sometime in Aug 2018 then the last date for processing that return is 31st March, 2020 (i.e. one year from the end of F.Y. 2018-19 (which is the financial year in which the return has been filed).

An example of when one has Income Tax refund 

For example, if a person has

  • Income from Salary as 5,54,900
  • His company deducts tax of Rs 37059
  • He has invested in FD and earned interest of Rs 14,000. Bank has deducted TDS of 1400.
  • He has saved 50,000 under 80C
  • He has 8000 as interest from Saving Bank account.
  • His total tax due calculation is 29643, shown in the image below.
  • As he has paid the tax of 38,459 which is more than due 29643. He is eligible for the refund.
Income Tax calculation example for income tax refund

Income Tax calculation example for income tax refund

How will the Income Tax refund be paid?

It will be deposited in the Primary bank account selected by you. From AY 2015-16, you are required to give details of all Savings and Current Bank Accounts which are operational, out of which, you will have to select the saving bank account in which refund,if any,shall be credited, as shown in image below, where one has ICICI bank account and SBI bank account. ICICI bank is chosen as the bank account for the refund.

Bank account details for income tax refund

Bank account details for income tax refund

Can the refund be set off against Amount outstanding?

Yes, if you have some amount outstanding for that assessment year or previous assessment years, then the Assessing officer can adjust or set off the refund with such tax demand after giving you a due intimation.

Interest on excess Tax paid? 

If the amount of refund is more than 10 per cent of the total tax payable for that particular year then you are entitled to receive simple interest on your tax refund. Interest is computed @ 0.5 per cent per month on the amount of refund. The interest is computed from the beginning of the next financial year till the date of grant of the refund. For example:

  • For financial year 2015-2016 your total tax liability was Rs 50,000.
  • Tax deducted at source(TDS) by the employer was Rs 65,000.
  • Therefore, you have paid more than your tax eligibility and can claim a refund of Rs 15,000.
  • Since the refund amount is more than 10 per cent of your tax liability (15,000 > (50,000 X 10 %=5000)) you would be eligible to receive interest on your tax refund.
  • Let’s say the refund is issued to you in December 2016. Then the total interest on refund would be (15,000 * 0.05 X 9 months) = Rs 675. Therefore, the total amount of refund including interest would be Rs 15,675.

Is the refund taxable?

The amount of refund is not taxable. However, interest received on tax refund is taxable. In the above instance, interest received is Rs 675 and therefore only this amount will be taxable. The rate of tax would be as per your applicable slab rate. You may include it in the taxable income of the year in which such refund is received.

Is the refund paid reflected in Form 26AS?

Yes, interest is reflected in Form 26AS, as shown in the image below. Our articles  Viewing Form 26AS on TRACES and What to Verify in Form 26AS? talks about Form 26AS in detail.

Income Tax refund details in Form 26AS

Income Tax refund details in Form 26AS

How to check Income Tax Refund status?

Check Income Tax Refund Status at Tin NSDL

  1. Go to: https://tin.tin.nsdl.com/oltas/refundstatuslogin.html
  2. Enter the PAN number
  3. Select the assessment year
  4. Press the submit button and the income tax refund status will be displayed on the screen.
Income Tax refund status TIN NSDL

Income Tax refund status TIN NSDL

Check Refund Status at Income Tax efiling website

You can login to income tax department’s website using your UserID (PAN ) and password . Click on “My Account” tab. Click on Refund/Demand status. You will get a proper year-wise status of your income tax refund status as given below.

Income Tax Refund status at income tax efling site

Income Tax Refund status at income tax efling site

Understanding Refund Status

Status Meaning
No e-filing has been done

You have either not filed your return or filed manually.

To be eligible for a refund, you are required to file your return online as the returns filed manually are not qualified for a refund from F.Y. 2014-15.

Refund is already credited to your bank, please contact your bank.

Refund has been processed and credited to your Bank Account

If your refund has not been credited, then contact:

State Bank of India.

Address: SBIFAST 31, Mahal Industrial Estate, Off Mahakali Caves Road, Andheri East, Mumbai – 400 093

Email: itro@sbi.co.in

Toll free Number: 1800 425 9760

Refund cheque has already been encashed.

Your income tax refund process is complete & it has been credited to your Bank Account and the same has been encashed.

If your refund has not been credited, then contact:

State Bank of India.

Address: SBIFAST 31, Mahal Industrial Estate, Off Mahakali Caves Road, Andheri East, Mumbai – 400 093

Email: itro@sbi.co.in

Toll free Number: 1800 425 9760

Refund Not Determined

Your Income Tax Return status is still under process at the Income Tax Department’s end. Just wait for some days and check income tax refund status again.

Unable to credit refund as the account number provided by you is incorrect.

This means that the account number provided by you was incorrect. You are requested to apply for refund reissue by providing the correct account number to claim your refund.

Defective return u/s 139(9)

It may be that your return has been treated as the defective Return. For exact reason, you can check this in your income tax website user account.

ITR Processed but need to submit rectification request

It may occur due to mismatch in the calculation of department & us. For this you may receive intimation from the department to submit once again your calculation sheet.

Return submitted. Processing rights transferred to Jurisdiction Assessing Officer.

It implies that your return will be processed by your Jurisdictional Assessing Officer (AO). Please contact AO for further details.Click here to know your AO. –

https://incometaxindiaefiling.gov.in/e-Filing/Services/KnowYourJurisdictionLink.html

Return Submitted and not verified

It implies that your return has been submitted successfully but it has not been e-verified either through post or online mode. Further, until and unless you verify your return, it would not be processed by the income tax department. So, please verify within 120 days from the date of filing.

 

Return Processed with No Demand and No Refund

It implies that your return has been processed successfully without any additional tax payable or refund due. Further, you can check the details from the intimation received u/s 143(1) on your mail id.

Return Processed and tax Demand determined

It implies that your Income has been assessed by Income tax department from your filed ITR and tax payable amount has been determined upon it.

You can check the details from the intimation received u/s 143(1) on your mail id.

In that case, you need to submit the response through E-Filing website under “efile tab” -> “Response to outstanding tax demand”.

Return Processed. Refund determined and sent to Refund Banker.

It implies your refund claim has been forwarded to the refund banker for processing.

So, wait for some more days and the refund amount will be credited in the bank account mentioned by you at the time of filing the return.

Return Processed and Refund returned Unpaid

It implies that income tax department has sent refund to you but either your address is wrong or bank details provided are incorrect, due to which refund was not processed.

In that case you need to place a refund reissue request stating the failure reason under “My Account” -> Service -> “Refund reissue request”.

e-Return for this PAN and Acknowledgement Number has been Digitally signed

It implies that your return has been filed successfully and it is digitally signed.

Return Submitted and under processing

, It implies that your Income-tax Return is still not processed. Further, no need to worry if you have e-verified or sent your ITR V by post then definitely it would be processed by the department sooner or later and whenever you will receive the refund , it would be credited along with interest.

Return Processed and Refund Paid

Congratulations! It implies that your return as well as refund has been processed successfully and refund has been credited in your bank account. Now, no further action is needed from your side for this year.

Return Submitted and verified

It implies that your return has been submitted and successfully verified, now it shall be processed by the income tax department. So, you have to wait for some more days.

Invalid Return

It implies that your return has been treated as Invalid return by the Income Tax Department. You need to file your return again in this case.

Return Processed and Rectification Rights Transferred to Assessing Officer

It implies that your return has been processed, however, for rectification, you need to contact Assessing Officer as the rectification rights have been transferred by CPC. So, instead of the online route, you have to submit your rectification request to your local AO directly.

Return Processed. Refund adjusted against demand

If any previous amount outstanding by the department, then the department will adjust the amount you owed in the current year’s refund. But before adjusting that amount they will send you a notice u/s 245, stating that they are adjusting your refund with the previous years’ outstanding amount. You have to submit your response to it that whether you agree with department or not. If the response is not submitted timely then department adjust the demand and processed the return after adjusting the demand.

Problems of Income Tax Refund

What can be the reasons for not getting the Income Tax Refund

If it’s already been verified, then the reason for not receiving your refund can be:

  • Your ITR is status still under processing:
  • Your ITR has been processed but Income Tax Department determined: No Refund Due
  • The Return has been processed after determining the refund, but refund could not be credited due to reasons like incorrect bank account number, incorrect postal address etc.
  • Your ITR has been processed after adjusting it with outstanding demand (if any).

My refund is still not processed. How do I escalate this?

If you have e-filed your return and you do not receive your tax refund within a reasonable time,a month, you should check if ITR-V of return is verified or not. Return will not be processed till ITR-V is verified.

In case ITR-V is already verified, but still there is delay, you can follow up with the Centralized Processing Centre (CPC) of the Income-tax Department on 1800 4250 0025 or 080-2650 0025.

What to do if refund cheque is returned or refund is pending due to incorrect details?

Login in income tax department’s website.

  • Click on My Account tab.
  • Click on Refund Re-issue Request.
  • Select the relevant Assessment Year.
  • You will be asked CPC communication reference number (In case you have received an intimation u/s 143(1) or a rectification order u/s 154, communicating to you about the failed refund, then you will find this CPC reference number on the first page of the intimation or order. It will be in” CPC/1234/P2/xxxxxxxxxx” format where “xxxxxxxxxx” represents a ten digit number. and Refund Sequence number will be a ten digit number on  first page of the intimation or order as per CPC order.
  • Finally, click on Validate button.
Income tax refund reissue request

Income tax refund reissue request

How to check whether income tax refund re-issue request is sent or not?

After logging in income tax department website, on top, you will see My Request List, click on it, and select the option ‘Refund Reissue Request” from the drop-down. And you will know the status of your request.

Income tax status of refund reissue request

Income tax status of refund reissue request

I have got less refund. How to rectify it.

So long as your processed e-return for relevant Assessment Year is still with CPC, the online rectification application may be made on website. However, in case, your processed e-return has been transferred to your Assessing Officer, then, you need to approach AO with rectification application on paper. For knowing the location of processed e-return (whether with CPC or the AO), the taxpayer is advised to login to the website using his/her userid and password and go to MyAccount-> eFilled Returns/Form. The process status of return can be checked for a given assessment year as shown in image below. You can see if ITR is transferred to Assessing Officer or not or it is processed by CPC.

Income Tax ITR processing status

Income Tax ITR processing status

Income Tax Refund Fraud

Income Tax Refund Phishing Scam has been happening for the past few years wherein you would be sent an email regarding refund of the excess tax paid. You can be lured by the income tax refund money and would end up giving the scamster your internet banking login details.

The email states that your Income Tax Refund Status has been approved and to claim the Refund, click on the link given in that email. Copy of one such email is given below. When you click on the link stated in that email, it will take you to a website which would look exactly similar to the Income Tax Govt website. But if you see the address bar of your browser, it would not be the official income tax website. In many cases, the address of the website has numbers followed by letters.

The fake website that opens asks you for your Bank and Credit/Debit Card Details (including your Password and PIN No.) for the purpose of paying the Income Tax Refund due to you. The purpose of making you submit these details is because the hackers would now have access to your Bank and Credit/Debit Card details and can use it for their own purpose. This means that the person behind this scam can approach your bank with all the information that a bank employee might ask to verify the requester’s authenticity! And once he is authenticated, he can easily wipe out your bank account in no time! Many such cases have come to light wherein the hackers behind this scam have withdrawn funds from bank accounts through such fake emails.

The image below shows sample Income Tax Refund fraud mail.

Income Tax refund scam

Income Tax refund scam

Circular for Condonation of delay in filing refund claim and claim of carry forward of losses

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Income Tax Refund Overview

Income Tax Refund overview

Income Tax Refund overview

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