Generally, incomes earned in the financial year (previous year) are assessed in the next year and taxes paid (assessment year). Even though incomes are assessed in the subsequent year in most cases taxes are paid in advance by way of TDS or advance tax.
At the end of the year when incomes are assessed it may turn out that you have already paid taxes more than required to be paid. In such cases, you may claim refund of the excess taxes paid.
Cases where refund can be raised?
1. Taxes paid by way of advance tax on the basis of self-assessment is more than the taxes required to be paid on the basis of regular assessment.
2. TDS deducted on salary, rent, interest, dividends is more than the tax payable on regular assessment.
3. If any tax has been reduced after certain assessment by authorities when called up for scrutiny.
4. If you have not declared any tax saving investments or deduction in the original return and paid taxes. Later filed revised return claiming those deductions.
5. If any income has been taxed in any foreign country, with which India have DTAA, and taxed again in India.
How to get income tax refund?
Any income tax refund can be claimed only by way of filing income tax return. Earlier people used to claim refund by filing Form-30. Now it has no relevance as income tax department is processing refunds by income tax returns only.
How to calculate income tax refund: -
To calculate income tax payable or tax refund, follow the steps
1. Calculate all the incomes under 5 heads of income.
2. Consider the exemption of certain incomes from taxability under section 10.
3. Calculate the gross total income.
4. Deductions under chapter VI-A must be deducted. (sec 80C to 80U).
5. Resulting amount will be net taxable income.
6. Calculate tax payable based on income tax rates applicable. (net taxable income * rates).
7. If the assesse is an individual and net taxable income is equal or less than 3,50,000. Then calculate rebate under sec. 87A.
8. Add education Cess and secondary higher education Cess of 3% on tax payable.
9. Now you arrive at net tax payable.
10. Now deduct the tax already paid by way of self-assessment tax, advance tax, TDS, TCS etc.
11. If the resulting figure is positive pay tax. If negative you are eligible for a refund of resulting negative amount.
How much time it takes to get refund?
Usually it takes 2-3 months from the date of filing your return to get your refund. If return is filed physically it may take more time.
How is refund paid?
Income tax refund is paid by either direct credit to your bank account or by cheque.
Can I claim tax refund from previous years?
The claim for refund shall be made within 1year from the end of relevant assessment year.
You can claim refund of taxes for last 2 years by way of filing tax returns of such years (original or revised).
How to check refund status?
To check your refund status, go to https://tin.tin.nsdl.com/oltas/refundstatuslogin.html
Enter the details of your PAN number and select assessment year to which refund claimed.
Interest on refunds?
If refund is out of advance tax/TDS/TCS, the assessee shall be entitled to 0.5% per month or part of month from 1st April of the AY to the date on which refund is granted.
If refund is for other taxes or penalties, interest shall be calculated @0.5% per month or part of the month from payment date to refund grant date.
However, no interest shall be paid if refund is less than 10% of tax paid.
Is interest on refund shall be treated as income or not?
The interest paid shall be treated as income of the previous year in which it is allowed and therefore shall be declared in the return of income.
If the assessee’s total income includes income of any other person by virtue of clubbing provisions, then he will be entitled to the refund not only with respect to his income but also with regard to the clubbed persons income.
Normally refund will be paid to the person who had paid taxes. But in some case refund will be granted to some other person.
If a person is unable to claim refund due to death or incapacity, insolvency, liquidation or other cause then his legal representative or trustee or guardian or receiver is entitled to claim refund.