Getting an income tax refund after filing income tax returns can be a hassle even for experienced taxpayers. Taxpayers often end up paying the tax amount over and above the actual tax payable. Not to worry, as there is an established procedure to get your excess payment back. Taxpayers can file for income tax refunds and the excess tax deducted will be returned to the taxpayer as a refund under Section 237 of the Income Tax Act, 1961. In this article, we will focus on various aspects of claiming a tax refund and the importance of keeping a tab on the income tax refund status. We will also walk you through the process of checking and tracking income tax refund status online.
What is an income tax refund?
Income tax refund refers to the repayment of the excess amount of tax paid by an individual or entity. This situation occurs when the total amount of tax paid surpasses the actual tax owed. Individuals usually become aware of the income tax refund while filing their Income Tax Return (ITR).
Typically, taxes paid by a taxpayer either directly or on his behalf fall under three categories: tax deducted at source (TDS), tax collected at source (TCS), as well as self-assessment tax and advance tax.
Once a tax return is submitted and the assessing income tax officer confirms its accuracy, they may approve and process the income tax refund, if any. The refund can be issued as a physical check mailed to the taxpayer’s address or through direct deposit to the designated bank account.
Importance of checking the income tax refund status
When it comes to income tax filing, accuracy is paramount. Checking the status of an income tax refund is important for several reasons. Once an individual files for an income tax refund, he should monitor the status and ensure transparency in the entire process. This offers taxpayers a clear understanding of the progress of their refund and will also help them resolve any roadblocks in the refund process.
Besides, in situations where discrepancies are identified, individuals might be required to get them corrected by communicating with the income tax department. So, it is recommended to regularly check the ITR status and stay informed about the progress.
In addition, being on top of the refund status allows individuals to plan their finances well.
Ways to check income tax refund status
There are many ways to check the status of the income tax refund online. The most common one is using the IT Department website. Here’s a step-by-step guide to checking ITR using the ITD website:
- First, visit the ITD website here
- The link will take you to a page where you will have to enter your PAN and the Assessment Year for which the refund is to be checked.
- Scroll below, enter your mobile number, and click on continue.
- You will receive an OTP on your registered mobile number. Enter the OTP and click on continue.
- The refund status will be displayed.
Note: For a seamless experience in the ITR procedure, ensure that you have all necessary documents ready, including Aadhaar and PAN details seeded to a working mobile number, bank account details, and Form 16.
Common issues and tips for faster refund processing
When anticipating a tax refund, delays are common but you should keep in mind that the ideal timeline for an income tax refund is 21 working days after the IT return is processed. While some factors are beyond the taxpayer’s control, some delays can occur due to taxpayer errors or oversights. Let’s identify some common issues that can delay the refund process:
- Incorrect information: If errors are made during tax filing or if the IT department identifies numerical discrepancies, it can significantly delay the refund process.
Tip: Double-check your tax return for accuracy before filing and maintain a record of income, deductions, and credits claimed to support the information provided in your return.
- Incorrect bank account number: To ensure a prompt online income tax refund, accuracy in entering bank account details is crucial. Even minor errors, such as a misspelled name or an incorrect account number, can lead to delays.
- Delay in filing: The timeliness of tax filing directly impacts the processing of refunds. To avoid delays, it is highly recommended to submit your return before the deadline.
Tip: Keep up-to-date with tax-related information from credible sources like the Income Tax Department. Besides, in most organizations, the HR department updates employees about tax-related things, which should also help.
- Not responding to ITD communication: If the Income Tax Department (ITD) has any query about the IT return filed, it issues a notice to the assessee, seeking clarification. No response or delayed response from the individual can further delay the refunds.
Tip: Regularly check your email, SMS, and other communication channels once you file a tax return, and respond promptly if the ITD requests additional information.
- Wrong selection of ITR form: If you select the wrong ITR form, the entire effort will be futile and can delay the processing of returns and refunds.
Tip: Exercise caution while choosing the ITR form. You can also consult your office CA who can guide you through the correct procedure.
Bonus tips for expediting the refund process
Here are some additional tips to expedite the income tax refund process and help you reclaim your funds efficiently:
- Check refund status regularly: Individuals should monitor the status of their refund process regularly. Start with verification of ITR because without verifying the ITR, the income tax department will not start processing the refund. Similarly, taxpayers should always be alert about blockers that could delay refunds.
- Opt for e-filing: Although offline channels are available, opt for e-filing. E-filing is not only convenient but also expedites the processing of your return. Besides, registering with the e-filing portal can also help you track the refund status.
- Choose direct deposit: Choose direct deposit to receive your income tax refund. This method ensures a swift deposit directly into your bank account, typically within a few weeks after filing. However, be sure to provide the correct bank account details.
This blog post aims to educate you about the key points to remember while filing for refunds. Despite the reduced processing time thanks to e-filing, people often make silly mistakes leading to delays in the processing of refunds. It is important to follow simple steps like monitoring the refund status online.
We have discussed in detail how to file for refunds from the Income Tax Department, with tips on avoiding some common mistakes. Of course, filing timely, accurate IT returns will ensure that you receive your refunds on time.
Q. If my income tax refund is delayed, will I get compensation?
A. Yes, if your income tax refund is delayed, then you will get 0.5% per month/part of the month interest on the amount that was due. This interest will be calculated from 1 April of the assessment year till the date on which your refund has been granted.
Q. When will I become eligible for an income tax refund?
A. You will be eligible for an income tax refund if you have paid a tax amount over and above the actual tax payable. The refund amount will be calculated during the time of filing the ITR.
Q. Will I have to pay tax on the refund amount?
A. The income tax refund will correspond to the excess amount of tax that you have paid. This is not an income and is not taxable. However, the interest earned on the income tax refund will be taxable.
Q. Do I have to file returns to get an income tax refund?
A. Yes, if you wish to claim your income tax refund for any excess amount of tax you paid during a financial year, you will have to file an income tax return for the respective assessment year.
Q. Is there a limit to the number of times revised returns can be filed?
A. The returns can be filed multiple times within the one-year expiry limit.