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How to get your Tax Refund Back

Updated on: 23 Nov, 2023 01:22 AM

We know that you pay your taxes carefully and advance tax as and when due. But, in case, you are wondering what happens when you have paid taxes more than you are actually supposed to pay or tax has been deducted (TDS) from your income much more than required, then you are at the right place! Let’s understand how you can get your refund back!

In the case of excess payment of taxes, you are entitled to a refund of excess tax paid and even interest on the amount of refund.

How is the amount of tax refund calculated?

The same can be calculated as follows:

  • Calculate the total amount of tax paid for the year (by any means i.e. advance tax or tax deducted/collected at source or self-assessment tax or payment of tax on regular assessment).
  • Calculate the actual tax payable at the year end.
  • Tax Refund shall be (A) (B).

How to claim refund?

The simplest way to claim your refund is by filing your Income Tax Return online for that Assessment Year. Just make sure that you provide all the details of tax deducted and tax paid along with the details of income so that the component of refund is reflected in your income tax return. Also, its mandatory to file your tax income return online in case of refund. Just follow this and you're all set to go, no other procedure is required.

You can also claim the amount of refund u/s 237 by satisfying the Assessing Officer that the amount already paid as taxes is more than the amount of tax you are supposed to pay for the year. Normally, the person who pays tax is eligible for claiming the tax refund except the following two cases u/s 238:

  • Where the income of one person is included in the total income of another person (i.e., as per the clubbing provisions), then the latter shall be entitled to claim the refund.
  • Where because of cases like death, incapacity, insolvency, liquidation, etc., a person is unable to claim any refund, then his legal representative / the trustee / guardian are entitled to claim the refund for the benefit of such person or his estate.

Further, in case, where the refund is due as a result of any order passed in Appeal, the assessing officer shall himself grant the refund of tax, and you are not supposed to claim the same.

Is there any applicability of interest also on refund?

Yes, you will be eligible for interest on delayed refund u/s 244A as follows:

  • In the case of refund arising out of TDS / TCS / Advance Tax Interest is calculated @0.5% for every month or part of a month for a period starting on 1st April of relevant AY till the date of grant of refund in case the return is filed in time. However, if the return is not filed within the due date the period of interest shall be from the date of online filing the return to the date of grant of refund. It is also to be noted that if the refund is less than 10% of the tax determined under assessment, then you are not entitled to any interest.
  • In the case of refund arising out of Self Assessment tax u/s 140A – Interest is calculated @0.5% for every month or part of a month for a period starting from the date of online filing of return or payment of tax, whichever is later to the date of grant of refund. In this case also, if the refund is less than 10% of the tax determined under assessment, then you are not entitled to any interest.
  • In case of variation in the amount of refund – Where, as a result of an order u/s 143(3) / 144 / 147 / 154 / 155 / 250 / 254 / 260 / 262 / 264 or an order of the Settlement Commission u/s 245D (4), the amount of refund payable has been increased or reduced, then the amount of interest shall be increased or reduced accordingly. The assessing office may issue a demand notice for recovery of excess interest paid.
  • In any other case – Interest is calculated @0.5% for every month or part of a month for a period from the date of payment of tax to the date of grant of refund.

Suppose, Ms Gupta has paid advance taxes of Rs. 50,000 over the year when she was actually liable to pay a tax of Rs. 30,000 only, then, in that case, she is entitled to a refund of Rs. 20,000/- along with the interest @0.5%. Let's say, that Ms Gupta filed her return on 5.09.2016 i.e., after the due date and the refund of Rs. 20,000 is received by her on 30.11.2016, then, the interest payable shall amount to Rs. 300/-. (Rs. 20,000 x 0.5% x 3 months)

Can the amount of refund be set-off against any due tax liability?

There can be cases, where you are eligible for a refund in respect of some year(s) and also some demand of tax is pending on you, then, in that case, the tax authorities estimate tax return by setting-off the amount of refund due against the amount of tax due from you u/s 245 of the Act. However, such an action can be taken by the department only after they give you intimation in writing of the action they propose to take.

We hope that now you know what to do in case you have paid excess tax and how you are supposed to get your refund that too along with interest. In case you still have any doubts, contact us at [email protected] or call +91-9116684439!

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.