How to claim income tax refund

As per the Income Tax Act, a person is required to file his/her return in the relevant assessment year by July 31 (unless deadline extended) to claim the refund.

ITR filing guide: The process of claiming income tax refund
Every year we all file income tax returns (ITR) but most of us are not sure about how the process of claiming income tax refund works. For the FY 2018-19, the last date of ITR filing has been extended by a month from July 31, 2019 to August 31, 2019.

You are eligible to receive income tax refund when you have paid more tax to the government than your actual tax liability. This usually happens when the advance tax, self-assessment tax paid or TDS deducted of the taxpayer is higher than the total tax liability of a taxpayer.

Process to claim Income Tax Refund

A person can claim the refund of the excess tax paid/deducted during a financial year by filing his or her income tax returns for that year.

As per the Income Tax Act, a person is required to file his/her return in the relevant assessment year by July 31 (unless deadline extended) to claim the refund. The FY immediately succeeding a financial year is the relevant assessment year (AY) for that FY.

A person can file his/her return either by uploading the filled excel/java utility form or by providing the required data in the online forms (Only for those eligible to file ITR 1 or ITR 4 form).

This year, tax department has started providing pre-filled ITRs on the online platform. The ITR form is filled with information regarding salary income, interest income (in case TDS is deducted) and other details. If you are filing ITR using Excel utility, then you can download XML file to pre-fill your ITR.

Also Read: Tax department will pre-fill these details in ITR-1

Also Read: Pre-filled ITR now available for all individuals

Refund claimed shows in ITR filed by you
Once you fill up the entire ITR form applicable to you and click on the validate button on the 'Taxes paid and Verification' sheet the system will auto calculate the refund due to you (as per the data entered by you) and the refund amount will show up in the 'Refund' row as shown in the picture below.
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This is the refund amount claimed by you and not necessarily what is accepted and paid by the IT department. The refund amount, if any, that you will be paid will be decided by the IT department after processing your return.

ITR-1-image-FY2018-19
(Screenshot from ITR-1 for FY 2018-19)
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Also Read: How to file ITR-1 online for FY 2018-19

Once you file and verify your ITR the I-T department will process it and verify the genuineness of the claim made.

Remember this year, you need to ensure that the bank account in which you wish to receive the refund amount is pre-validated. The tax department has previously announced that they will issue e-refunds to the bank accounts in which PAN is linked and is pre-validated on the e-filing website.

Also Read: Pre-validate your bank account to claim refund

After processing of return, an intimation will be sent to you depending on the outcome of the processing. In most cases, intimation under section 143(1) is sent to you showing any one of the following: (a) That your tax calculation matches that of the tax department and no further tax is payable by you (b) That your calculation does not match that of the tax department and there is additional tax (called tax demand) payable by you or your refund claim is rejected or accepted partially i.e. reduce amount. (c) That your calculation matches that of the tax department and refund claim is accepted by it.

In case of e-filed returns, the intimation is sent to you via email. When this email is sent, normally a sms stating that your ITR is processed is also sent to your registered mobile number. In case the department wants more information or your case is picked up for scrutiny then a notice under a different section may be sent to you instead of under section 143(1).

In case refund due to you is accepted, the intimation also states amount of refund that is payable. The department provides the refund reference number. One can track the status of his/her refund by logging in at the income tax e-filing website and clicking on the Refund/Demand Status under the 'My Account' tab.

Alternatively, one can track the refund status by visiting https://tin.tin.nsdl.com/oltas/refundstatuslogin.html

The website is very user-friendly as it requires only PAN and Assessment year information to check the status of refund.

The department has designated State Bank of India for payment of refunds either through cheque or direct credit into the taxpayer's account. It is advisable that you mention the correct bank details in your ITR form to get timely payment from the department.

The ITR has a specific row for filling in the details of the bank account to which you want refund, if any, to be credited (See picture below). Refund, if accepted as due, will normally be directly credited to the bank account you gave for this purpose in your tax return.

bank-account

Interest on Refund
If refund is due to a taxpayer, section 244A states that interest shall be payable to the taxpayer/assessee subject to certain terms and conditions.

Interest on refund is payable to an assessee if the following terms and conditions are fulfilled: - If the return is filed on or before the due date i.e. July 31st of the AY relevant to the FY for which the return is filed.

Archit Gupta, founder & CEO, ClearTax.com says "The period for the calculation of interest on refund is based on mode of tax payment:
a) Where refund is of excess payment of advance tax or TDS:
(i) if return is filed on or before due date, period shall be from April 1 of relevant assessment year to the date refund is granted OR,
(ii) where return is not filed on or before due date, the period shall be date of furnishing of return to the date of grant of refund

b) Where refund is of excess self-assessment tax paid: period shall be from the date of furnishing of return or payment of tax, whichever is later to the date on which refund is granted."

However, no interest is payable if the amount of refund is less than the 10 percent of the tax liability. Also, if the payment of refund is delayed due to any action of the deductor then such period shall be excluded from the total period for which interest payable is calculated.

One must also remember that interest received on the refund amount is taxable. The assessee is required to include the interest paid to him on the refund, in his gross total income while filing return for the financial year in which he has received it.

Interest is calculated using the simple interest method on the amount due for refund at the rate of 0.5 percent for a month or part of month or at 6% per annum.

Interest to be paid by you in case of excess refund by the department
Do you know 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 regular assessment of return finds that amount of refund paid to the taxpayer is higher than the amount he is eligible for, then they can recover the same along with interest.

Regular assessment is assessment done after the initial assessment. Initial assessment is done when the return is processed for the first time. Regular assessment can be described as the scrutiny of the income tax return filed by the assessee.

The rate of interest levied by the department is same as interest on refund paid by the department i.e. 0.5 percent per month or 6 percent per annum.

The period of interest is taken from the date of grant of refund till the date of the regular assessment and is calculated using the simple interest method.

Forgot to claim the refund?
CBDT in its circular dated 09.06.2015 has clarified the rules regarding claim of the refund if the taxpayer hasn't claimed the same while filing the income tax return.

The claim of the refund has to be made using 'Form 30'. It has to be made within one year from the last day of the relevant assessment year i.e. the AY relating to the financial year for which the return is filed. The acceptance of claim depends on the claim amount and the judgement of the income tax commissioner.

Refund pending due to incorrect details
At times it happens that you have filed your ITR with a refund claim but you haven't received it. It may be because of the following reasons:

1. Once the department has done the initial assessment of your verified ITR, it has found that no refund is payable to you. This will reflect in the notice under 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 then it will be issued but if the notice shows nil refund then it means that your refund claim was not accepted as your calculations did not match those of the department's.

2. Department has processed your refund but you have not received it due to wrong bank details or cheque has not been received by you due to wrong address details.

If your refund is pending due to incorrect details provided by you, you can request the department to re-issue the same after giving the correct bank details.

You are required to sign in on the income tax e-filing website and raise the request for the same under 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 refund claim in the return.This helps you track the processing of your ITR and refund (if any). It also helps check if you have made any mistake while filing the return.
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