A taxpayer becomes eligible for an Income Tax Refund when the taxes paid are higher than their actual tax liability, inclusive of interest. It could be in the form of advance tax, self-assessment tax, TDS, etc. Hence, it is quite common for taxpayers to be curious to know the ITR refund status.
Eligibility of Income Tax Refund
To be eligible for an income tax refund, the taxpayer must file an income tax return. In the following instances, the taxpayer becomes eligible to claim a tax refund:
- When the advance tax paid on estimated income is higher than the actual tax liability of a taxpayer.
- If tax deducted at source (TDS) from salary, interest, professional or other incomes is higher than the tax payable on regular assessment.
- When self-assessment tax paid is in excess of actual tax liability.
- When an individual pays taxes on income in both India and a foreign country (with whom the Indian government has an agreement to avoid double taxation).
How to claim an Income Tax Refund?
Income Tax Department will not automatically pay you a refund just because you have paid excess taxes. Hence, it is mandatory to file an income tax return to claim a refund.
Additionally, while filing, it is necessary to declare the income, deductions, taxes paid, and their details (challan details) to the ITD.
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Once you have filed your income tax return, you need to wait for an assessment from the Income Tax Department. Here is what you need to do:
- You will receive an intimation u/s 143(1) once the return is processed.
- It will contain a comparison of income and tax calculations as per your tax return and as per the Income Tax Department.
- If the refund amount stated in the ITR and the notification match, the refund is correct. A taxpayer can track income tax refund status on the e-filing portal or on NSDL.
- However, when there is a discrepancy you need to check the calculations for reasons of mismatch, and if there are any calculation errors then you can rectify your return u/s 154(1)
ITR Refund Timeline
ITD processes the return in batches and posts that credit the eligible refund.
Usually, after e-filing and e-verifying, it takes 45 to 60 days to process a return. Once the return is processed, the ITR refund is credited within a week.
What can be the reasons for the refund failure?
There could be numerous reasons for not getting an income tax refund in time, but the following are some of the most common:
- If the taxpayer has given incorrect bank details such as account no, IFSC code, name mismatch, MICR code, etc.
- In case your bank account is not pre-validated and consequently nominated for refund
- If the details such as the payment date, BSR code, and challan number are incorrect.
- If there is a discrepancy between Form 26AS and tax information when submitting an income tax return.
- KYC for the account holder is pending.
In case of refund failure, the taxpayer can issue a refund re-issue request.
Interest on IT Refund
Many times the taxpayer does not get the refund in due time, in such a case Income Tax Department pays interest on a late refund. However, no interest shall be payable if the amount of refund is less than 10% of the tax as determined under section 143(1) or tax determined under regular assessment.
Hence, when the refund is more than 10% of the total tax payable, the taxpayer is entitled to receive a simple interest on the tax refund u/s 244A of the Income Tax Act. Interest accrues at the rate of 0.5% per month or part of the month.
The interest is calculated from the beginning of the next financial year i.e., from April 1 till the date of refund.
For example, Surbhi has a total tax liability of INR 30,000, and she has paid INR 44,000 as tax. She can claim the excess INR 14000 as an ITR refund. Now, if the ITD delays issuing the refund, she will be eligible to get interest at 0.5% per month, as INR 14,000 is in excess of 10% of her total tax liability.
Taxability of IT Refund
IT Refund
The income tax refund is not an income and is, therefore, not taxable.
Interest on IT Refund
The interest amount is taxable under the head “Income from other sources“. Consequently, When filing returns for the financial year (FY) in which you received the refund, you will need to pay tax on the interest based on your tax slab rate.
Reasons for delay in income tax refund
| Sr. No. | Refund Status | Meaning | Action to be taken |
| 1. | Return not E-verified. | The return is successfully submitted but e-verification is pending. | E-verify the return on the Income Tax Portal Or use the Quicko Tool. |
| 2. | The bank account is not pre-validated on the Income Tax Portal. | The Bank account is not linked to the Income Tax Portal. | Request for Refund Reissue after adding and validating a bank account on the IT Portal. |
| 3. | The return is pending processing with the Assessing Officer. | The IT department is taking time to process your request. | Ensure that the return has been e-verified within 30 Days or can submit a grievance on IT Portal. |
| 4. | Mismatch in the TDS/TCS claimed. | There is a mismatch in Form 16 or Form 26AS and TDS/TCS claimed. | Have to file an online response by logging into the income tax portal or file a revised return. |
| 5. | Defective Return u/s 139(9) | Return was incomplete or improper. | Have to respond to the pending proceeding by logging into your income tax account. |
| 6. | Return processed and tax demand determined | After processing the return the tax department is of the view that some taxes are still due. | Check details in the intimation received u/s 143(1) and submit a response accordingly. |
| 7. | No Demand No refund found | It means ITR has been duly processed and there was no refund due | Check details in the intimation received u/s 143(1) and submit a response accordingly. |
| 8. | Refund adjusted against Demand | It means that the refund was payable but the same has been adjusted against some taxes payable for previous years | Check and submit response to the notice received for previous years. |
FAQ’s
No, a refund received by a taxpayer is not taxable. But, any interest received on the refund is taxable in the year in which the refund is received by a taxpayer.
The Income Tax Department processes the refund only after processing the ITR. The taxpayer can expect a refund within 7 to 10 business days of the processing of the refund.
Yes, you can file a belated return and claim the eligible refund. The due date to file a belated return is 31st December of the relevant assessment year.
You will receive your refund directly in your Primary bank account. You can choose the primary bank account while filing your ITR.
Can I claim my refund if I miss filing my ITR before the due date?
Hey @Zainab_Hawa,
Yes, you can claim refund by filing Belated Return, even if you missed the due date.
Hope this helps!