It is possible to claim Income Tax Refund if one has paid a higher amount as tax than what was due. Sections 237 to 241 of the Income Tax Act prescribes rules for refund of income tax.

Filing Income Tax Return (ITR) and Claiming Refund

In filling out the annual Income Tax Return, one can claim tax deductions by declaring individual investments, such as those in life insurance, ULIPs, SIPs, bank fixed deposits, payment towards child's tuition fees, and so on. These can be claimed via Form 16. Here are some scenarios in which an individual could pay more tax:

  • A refund claim can be made when a proper claim for exemption through Form 16 has not been made, and the tax has been paid more than the individual's tax liability.
  • TDS is higher than the total tax liability.
  • Self-assessment tax paid is higher than the income tax payable.
  • Advance tax paid is higher than the actual tax to be paid.

Process of Claiming Income Tax Refund

In the past, Form 30 was required to claim an income tax refund, but the Finance Act, 2019 specifies that the income tax department will process refund claims directly based on the income tax return. Refunds have become more convenient and easier to track, thanks to the digitization of the process.

As of 2019, the income tax department has provided pre-filled Income Tax Return forms that include details such as salary and interest income. The individual who fills out the ITR form applicable to his tax bracket has the option of validating it. The amount refundable will be automatically displayed in the refund row after the process is complete.

Individuals should, however, keep in mind that:

  • The refund amount will only be accepted after the ITR has been processed by the income tax department.
  • After the claim for refund is validated, the department will then issue e-refunds. You will receive your income tax refund in the bank account linked to your PAN number.
  • In order to claim a refund, one must ensure their bank account information is accurate and pre-validated.
  • The income tax department provides a reference number when accepting an individual's refund claim.
  • The department provides the number while informing the individual about the amount of refund that is payable through email and SMS to the registered mobile number.
  • In the income tax department's e-filing website, individuals can track the refund status by providing a unique number. The following three steps are required to track the refund claim:
    • 1. Login to the e-filing website with the requisite details like user ID and password.
    • 2. Click on ‘My Account’ tab, which will provide the option of refund/demand.
    • 3. Track your status.

A refund is usually transferred directly into the individual's bank account by the State Bank of India, which is designated by the Income Tax Department for refunds. Individuals who do not receive their income tax refund within the specified period are entitled to receive a monthly interest payment of 0.5%.