Many of us would have received a refund from the income tax department in the past. A tax refund or tax rebate is a refund furnished to the taxpayer when the tax liability is less than the taxes paid.
Taxpayers can avail a tax refund on their income tax if the tax they owe is less than the sum of the total amount of the withholding taxes and estimated taxes that they paid, plus the refundable tax credits that they claim. Tax refunds are usually paid after the end of the tax year.
Refunds arise in those cases where the amount of tax paid by a person is greater than the amount which he/she is properly chargeable, as per the Income Tax and other Direct Tax laws. The same is noted under Sections 237 to 245 of the Income Tax Act, 1961.
Eligibility criteria for Income Tax Refund
1. If the tax that you have paid in advance, on the basis of self-assessment, is greater than the tax that you are liable to pay as per the regular assessment
2. If your tax deducted at source (TDS) from interest on securities or debentures, dividends, salary etc. is more than the tax payable based on regular assessment.
3. In case 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.
4. If the tax charged on the basis of regular assessments is reduced due to an error in the assessment process which was resolved.
5. If you find that that the tax payable is in the negative, after considering the taxes you’ve paid and the deductions you are allowed.
6. In case you have investments that offer tax benefits and deductions, which you are yet to declare.
But what is tax e-refund?
Electronic filing is the process of submitting tax returns over the Internet using tax preparation software that has been pre-approved by the relevant tax authority.
How do you claim tax e-refund.
1. The Income Tax Department issues refunds, if any, only as an e-refund to the assessee. The process of issuing refunds through cheques has been discontinued.
2. To be able to receive the refund amount, the bank account of the assessee should be linked to his permanent account number (PAN) and should have been pre-validated on the income tax e-filing portal.
3. The assessee is required to visit the e-filing portal of the Income Tax Department at https://www.incometaxindiaefiling.gov.in.
4. To access the portal, one needs to enter user name (PAN of the assessee) and password, along with Captcha code to log in.
5. After logging in, the assessee should check the ‘dashboard’ tab. Then, click on the ‘profile settings’ tab to see a drop-down menu of options. Choose the ‘prevalidate your bank account’ option and proceed.
6. The assesee will have to enter the bank account number, IFSC code, bank name, mobile number and e-mail ID. Note that the PAN, mobile number and e-mail ID should be the same as that registered with the bank account. After this, the assessee should click on ‘pre-validate’ button.
7. The pre-validation status is sent to the registered e-mail ID and mobile number of the assessee. Alternatively, view your status by logging in to the e-filing portal, and clicking on ‘profile settings’ and ‘pre-validate your bank account’ tabs.
What do I if the refund is not processed?
Income Tax Return form has to be verified by the relevant authority to process income tax returns. If you are yet to receive your refund even after 3 or 4 months after the deadline of 31st July of a particular assessment year, it perhaps implies that your refund has not been verified yet.
Interest payable on delay:
A number of cases have been reported where the taxpayers have stated that they haven’t received their refund in due time. If this has happened to you too, don’t panic. You will receive an interest of 0.5% on your expected refund amount, for every month or the part of a month for which the refund is delayed. This interest rate is calculated from the 1st of April of the assessment year. However, in case it is found that the reason for the delay can be attributed to you, you will not be liable to receive any interest for that duration.
Setting-off outstanding taxes against refunds:
There may also be a case where you have a certain amount of taxes is outstanding against your name. In this case, under Section 245, tax authorities have the power to set-off your refund amount against such outstanding taxes.