Every year, crores of taxpayers across India file their Income Tax Returns (ITRs). However, when it comes to income tax refund, many are still ignorant about the same.
Most taxpayers lack proper awareness about income tax refunds and the process of availing the same.
From checking the refund status to the process of claiming, here's everything you need to know about income tax refunds.
What exactly is income tax refund?
Before moving on to the process of claiming income tax refunds, one must understand how and when a taxpayer becomes eligible for it.
Taxpayers get a tax refund if they have paid taxes higher than their total tax liability (including interest).
Such a situation arises when someone pays more tax in the form of advance tax, self-assessment tax, TDS (tax deducted at source), etc.
How can a taxpayer claim income tax refund?
A person claim refund of excess tax paid/deducted during a particular financial year at the time of filing the income tax returns for that year.
Taxpayers can file ITR by uploading the income tax utility form online or by providing required details on the e-Filing portal (for ITR-1 and ITR-4 categories).
They should ensure that their return is verified within 120 days after filing.
How to check income tax refund status?
Taxpayers eligible for refund will receive email and SMS along with the amount of refund and refund sequence number.
One can check the refund status on e-Filing portal by logging in to their account and clicking on View Returns/Forms> Income Tax Returns> Assessment Year> Acknowledgement Number.
Alternatively, they can check it on TIN NSDL portal by entering PAN details and selecting the assessment year.
Interest on refund
Taxpayers are eligible to earn interest on refund amount
If taxpayers are eligible for a refund of an amount 10% higher than the tax paid, they can earn an interest on the refund amount.
According to Section 244A of the Income Tax Act, taxpayers are eligible for an interest of 0.5% per month on the refund amount, calculated from 1 April of that assessment year to the date of grant of the refund.
Tax refunds are paid in these two modes
The Income Tax Department pays the refund amount to eligible taxpayers in two different modes. The first is RTGS/NECS through which the refund amount is directly transferred to the taxpayer's bank account while the second mode is standard paper cheque payment.