Common queries on Income Tax Refund

What is income tax refund?

Income tax refund, in simple words, is the amount which the Government pays back to the taxpayer who has paid excess taxes. From salaried person’s point of view, income tax refund mostly arises when the employer has deducted excess taxes from his salary.

What are the prerequisites for getting income tax refund?

In order to get income tax refund,you must first file your income tax return. The amount of refund receivable is to be shown in your income tax return. And secondly, there must be a genuine case of payment of excess tax.

Who can claim a refund?

Only the taxpayer himself can claim the refund of excess tax paid. But if the taxpayer is not in a position to claim the same due to death, incapacity or any other reason, then his legal representative/trustee/guardian/legal heir is entitled to claim the refund.

How can I claim refund?

You can claim refund by filing your return. However, if you forget to claim it then you can revise your return within specified period of time and claim refund in the revised return.

Will interest be receivable on refund?

If the amount of refund is more than 10 per cent of the total tax payable for that particular year then you are entitled to receive simple interest on your tax refund.

Interest is computed @ 0.5 per cent per month on the amount of refund. The interest is computed from the beginning of the next financial year till the date of grant of the refund.

Let's consider an example:

For Financial Year 2017-2018 your total tax liability was Rs 50,000.

Tax deducted at source by the employer was Rs 65,000.

Therefore, you have paid more than your tax eligibility and can claim a refund of Rs 15,000.

Since the refund amount is more than 10 percent of your tax liability {15,000 > (50,000 X 10 percent)} you would be eligible to receive interest on your tax refund.

Let's say the refund is issued to you in December 2015. Then the total interest on refund would be (15,000 * 0.05 X 9 months) = Rs 675. Therefore, the total amount of refund including interest would be Rs 15,675.

Is the refund taxable?

The amount of refund is not taxable.

However, interest received on tax refund is taxable. In the above instance, interest received is Rs 675 and therefore only this amount will be taxable.

The rate of tax would be as per your applicable slab rate. You may include it in the taxable income of the year in which such refund is received.

How to check refund status?

You can login to income tax department’s website using your User ID (i .e PAN ) and password. Click on the “My Account” tab. There is third option of Refund/Demand status. Click on it.

You will get the proper year-wise status of your income tax refund status as given below.

What to do if refund cheque is returned or refund is pending due to incorrect details?

Login to the income tax department’s website. Click on the “My Account” tab. Click on “Refund Re-issue Request”.Select the relevant Assessment Year.

You will be asked CPC communication reference number (In case you have received an intimation u/s 143(1) or a rectification order u/s 154, communicating to you about the failed refund, then you will find this CPC reference number on the first page of the intimation or order. It will be in” CPC/1234/P2/xxxxxxxxxx” format where "xxxxxxxxxx" represents a ten digit number. and Refund Sequence number will be a ten digit number on  first page of the intimation or order as per CPC order. Finally, click on the “Validate” button.

How to check whether our refund re-issue request is sent or not?

After logging in income-tax department website, on top, you will see “My Request List”, click on it, and select the option ‘Refund Reissue Request” from the drop-down. And you will know the status of your request.

Can refund be credited directly to my account?

Yes. It will be deposited in the Primary bank account selected by you. You are required to give details of all Savings and Current Bank Accounts which are operational, out of which, you will have to select your Primary account. After entering all the income details in your myITreturn account, you will be asked bank details. 

Can the refund be set off against some other payment?

Yes, if you have some amount outstanding for that assessment year or previous assessment years, then the Assessing Officer can adjust or set off the refund with such tax demand after giving you a due intimation.