A person who has paid more tax than the required amount is eligible to get an IT Refund. But before claiming it, there are certain essential rules about which you should know.
5 Income Tax Refund Rules Every Taxpayer Should Know About
1. When You are Eligible to Get an Income Tax Refund?
A taxpayer becomes eligible to get an ITR Refund when the taxes paid from this side are greater than the total tax liability. These tax types include tax deducted at source or TDS, tax collected at source or TCS, and other categories of taxes like advance tax, self-assessment tax, etc. However, in these cases where you are eligible for a tax refund, the amount is not released automatically. Hence, you will have to claim it.
2. How to Claim an Income Tax Refund?
When you file your Income Tax Return or ITR for the purpose of claiming an income tax refund then you are liable to mention all your income and claim all the exemptions and deductions that you are eligible for. In a particular scenario where taxes are collected or deducted from the taxpayer exceeding his or her total tax liability, the tax refund is initiated from the Government after your ITR gets processed.
3. How to Get an Income Tax Refund if You Have Failed to Filed ITR By Last Date?
In any case, you have failed to file your IT Refund for the relevant assessment year by December 31st, which is the last date to do so, you can still claim your refund as per circular no. 9/2015 for six assessment years under certain conditions. To get your refund under this circular, you will have to file an application telling the reason for your delay.
4. Taxability of the Amount as Income Tax Refund
There is confusion regarding the taxability of refund amounts. Excess tax paid is not taxable. Taxpayers receive interest on advance tax and TDS/TCS surplus. Interest is payable from April 1st of the following year. Full interest is given if ITR is filed by July 31st. If there’s a delay caused by the taxpayer, interest is not granted. Taxpayers must pay tax on the interest received. The deadline for filing ITR is December 31st of the next year.
5. How to Claim Your Blocked Income Tax Refund Amount?
The income tax laws include provisions that authorize the income tax department to offset any refund amount against outstanding demands from previous years. However, the law also states that the income tax department must provide intimation before making such adjustments. Unfortunately, this provision is not consistently followed. If your refund has been wrongly adjusted, you can file a grievance on the income tax website by logging into your account to claim the refund.
It’s important to note that while the income tax department has the power to adjust refunds against outstanding demands from earlier years, taxpayers do not have the privilege to adjust any income tax refunds from previous years against tax payable for subsequent years.