Income Tax Refund: Who is Eligible & How to Get Income Tax Refund

Sections 237 to 245 of the Income Tax Act, 1961, detail the provisions that relate to the income tax refund process.

The following are the scenarios wherein the taxpayer is eligible for a refund:

• If the advance tax paid is greater than the actual tax liability.

• If the self-assessment tax is greater than the actual tax payable.

• If the Tax Deducted At Source from your salary, interest on securities, dividends etc., is more than the tax liability.

• An error in the regular assessment of your tax liability that you took the necessary steps to resolve.

• You haven't or have not yet declared investments that qualify for tax deductions on the net taxable income.

• If your income is taxed in a different country and in India, which leads to double taxation.

Claiming the income tax refund is a simple process. It can be done conveniently from the comfort of your house through the online process. Here are a few steps that you can take to get the income tax refund.

1. File the income tax return(ITR) for that year before the last date announced by the government.

2. It can be done using the online method. You can access the e-filing portal for the same. You have to furnish the details regarding your investments that qualify for deductions. For instance, if you have invested to secure your financial future, your investments qualify for tax* deduction up to ₹1,50,000 under Section 80C. Provide the amount you have spent paying the premium for a tax deduction while filing ITR.

3. Once you have completed filling in the details, the system will automatically calculate the tax liability and map taxes paid against it, refund due if applicable on the form and display it.

This form will proceed with the verification process to evaluate the genuineness of your claim by the Income Tax (IT) Department. The claim might get rejected or accepted and paid by the IT Department. After the processing and verification, the IT Department will send an intimation to your registered email. The intimation will mention one among the following:

• Your calculation and the IT Department’s matching, and there is no refund applicable.

• Your claim is rejected as the calculation did not match and requires you to pay additional tax.

• The claim is accepted, and the IT Department will pay the refund.

• You must ensure to check your bank account details provided in the e-filing portal because the refund will be directly credited to your bank account by the IT Department. 

In case if your refund claim is accepted and is due, the intimation email will provide the refund amount payable and the reference number. You can check your income tax refund status based on that information.

Once you have filed and verified your return, it's a breeze to see where your income tax refund is in the process.

Through the Income Tax e-Filing Portal

The official portal of Income Tax e-Filing is here and you can login with your credentials. Click on the refund or filed returns section to know the status of ITR refund.

Through the NSDL Refund Tracking Facility

Another option to keep track of your refunds is through the NSDL refund tracking portal with the use of your PAN and assessment year. The most current refund status is shown on the portal. 

Common Refund Status Messages

While checking your income tax refund status, you may come across messages such as:

• Refund Issued: You received the refund, it was deposited into your bank account.   

• Refund Under Processing: The Income Tax Department is processing your return.  

• Refund Failed: There has been an error with your bank account information, or it has not been validated to accept a refund.   

• No Refund Due: Your tax calculations show that no refund is payable.   

If your refund fails, update and validate your bank account details on the e-Filing portal and raise a reissue request if required.

After you file and verify your Income Tax Return, the Income Tax Department starts to process your income tax refund. First, the return is screened for accuracy and information on income is verified. Then deductions are verified, tax payments are checked and documentation available to the department is verified too. 

Next, the department compares the tax deducted at source (TDS), advance tax and self-assessment tax shown in your tax return and records it in its database. The amount of tax paid, if more than the actual tax payable will be deducted, and the resulting amount will form your ITR refund. 

Once the verification is successful, an intimation notifying you under the relevant provisions of the Income Tax Act is mailed in your registered email address. Once approved, the refund will be sent directly to your validated bank account via the chosen banker for the refund.

These factors, including timely filing of Income Tax Return (ITR), validity of the information, and tax verification, all influence the time of getting income tax refunds. Typically, the ITR refund is credited to the taxpayer within 4-5 weeks of successful filing and verification of ITR return. However, this schedule can differ based on the quantity of returns being dealt with and whether there are any issues spotted.

Several factors can affect the processing time of an income tax refund, including:

• Delayed ITR verification after filing.

• Errors or mismatches in income, TDS, or tax payment details.

• Incorrect or non-validated bank account information.

• Additional verification required by the Income Tax Department.

• A high volume of return filings during the peak tax season.

To receive your ITR refund as quickly as possible, file your return before the due date, verify it promptly, and ensure that all details, including your PAN, Aadhaar, and bank account information, are accurate and up to date.

If you are eligible to receive the income tax refund, you will also receive interest on the same. The period for which the interest is calculated is based on the following:

When the refund is due to the excess of payment on advance tax or TDS:

The period will be from April 1(assessment year) to when the refund is granted if ITR is on or before the due date. The period will be from the date of filing ITR to when the refund is granted when ITR is filed after the due date. 

When the refund is due to an excess of self-assessment paid, the period will be from when ITR is furnished or payment of self-assessment tax done, whichever is later to when the refund is granted. In all other cases, the period will be from when the tax is paid to when the refund is granted. There will be no interest payable on the first two cases if the refund amount is 10% of the tax liability. Also, suppose the refund is delayed due to a deductor. In such cases, the period due to such an action will be excluded from the period for interest calculation.

The interest is based on the simple interest method of calculation on the amount due, which is at the rate of 0.5% per month or 6% per annum. It is important to note that the interest amount is taxable.

Also, if you are liable to pay an additional tax, you have to pay the interest based on the same simple interest method on the amount due from the date when the refund is granted to the date of regular assessment.

Income Tax Refund is a refund paid by the Income Tax department to the eligible taxpayers. It is provided to individuals who have paid more tax as opposed to the actual tax liability. The eligibility criteria and the process is detailed above for your awareness. You must claim the refund and receive it with interest payable by promptly filing the ITR. It is a simple and hassle-free online process!

And, if you are looking for tax*-saving avenues with life cover and assured returns on investments, look no further than savings-insurance plans. We provide comprehensive benefits while helping you save on tax*. The savings insurance plans provide life cover and a guaranteed¹ return on maturity. Based on your preferences, you can avail the maturity returns as a regular income or regular income with the inbuilt critical illness benefit.