Five income tax refund rules you should know

Due date for income tax return (ITR) filing is 31st July 2023. Who is entitled to get a refund, what are the taxation rules of ITR? And how to claim your refund? 



1)When you are entitled to get an income tax refund

A taxpayer is entitled to claim an income tax refund when the taxes paid on his behalf are more than his tax liability. The taxes paid by and on behalf of the taxpayer includes tax deducted at sources (TDS), tax collected at source (TCS) as well as taxes paid by the taxpayer himself like advance tax, and self-assessment tax.






In case you are entitled to a refund due to excess taxes paid over your actual liability, the refund does not come automatically but you have to file your ITR for claiming it. While filing your ITR for claiming a refund, please verify that the tax credit is visible in form no. 26AS. It is advisable not only to verify the details of all the tax credits available to you but also all the incomes which are shown Annual Information Statement (AIS). Since the income tax refunds are directly credited to your bank account. I would advise you to ensure that the bank account is validated while filing the ITR.



2)How to claim an income tax refund?

While submitting your ITR for claiming the income tax refund, you have to include all your income and claim various exemptions and deductions available to you. In case the taxes deducted/collected as well as paid by the taxpayer exceed the tax liability worked out while filing the ITR, you will get the refund after your ITR is processed. Please note that the refund does not come instantly but will be issued to you after the details of taxes already paid are verified by the income tax department from the information available with it.



3)How to claim your income tax refund if you have failed to file your income tax refund after the last date?

In case you have failed to file your ITR by 31st December which is the last date for filing your ITR, you can still claim your refund as per circular no. 9/2015 for six assessment years subject to complying with certain conditions. To claim a refund under this circular, you have to first file an application for condonation of delay and once the delay is condoned you can file the ITRs online for the last six years citing reference of the order granting condonation.




4)Taxability of income tax refund

There is some confusion about the taxability of the amount received after the claim of refund is processed. As far as the taxability of the amount received is concerned, the net amount of excess tax paid is not taxable at all. As per the provisions of the income tax act, the taxpayer is entitled to receive interest in respect of excess of advance tax and TDS/TCS over the net tax liability. The interest is payable from 1st April of the financial year following the year for which the ITR is filed. The taxpayer is entitled to get full interest if the ITR is filed by the due date for most of the cases i.e. 31 st July. In case there is a delay in filing a claim for refund attributable to the taxpayer, the taxpayer is not entitled to interest for such delay. So if you fail to file the ITR by the due date, you will not get the interest from 1st April till the month of filing of the ITR. The taxpayer is liable to pay tax on the interest on the income tax refund received. Please note that the last date to file your ITR is 31st December of the next year beyond which you cannot file your ITR.






5)When your refund due can be withheld and how to claim

The income tax laws have provisions authorising the income tax department to adjust the amount of refund due against any outstanding demand of earlier years. The law also provides that the income tax department has to give an intimation before such an adjustment is made. This provision is not complied with in all cases. If your refund has been wrongfully has been adjusted, you can claim the same by raising a grievance on the income tax website after logging into your account.






Though the income tax department has powers to adjust the refund due against any outstanding demand of earlier years the same privilege is not extended to the taxpayer to adjust any income tax refund due for any earlier years against tax payable for subsequent years.