Income Tax Refund

published by | February 26, 2025

Income Tax Refund arises in case of a mismatch between the tax amount paid and the actual payable amount. If the amount paid is higher than the actual amount payable, a refund is initiated.

Income Tax Refund

What is Income Tax Refund?

An income tax refund refers to the amount of money that a taxpayer receives from the government when they have paid more income tax during a particular financial year than what they owe. It represents a return of excess tax paid by the taxpayer to the tax authorities. When individuals or businesses pay their income tax through tax deductions at source (TDS), advance tax payments, or self-assessment tax, they may end up paying more tax than their actual tax liability. This can occur if they have claimed excessive deductions or if their tax liability is reduced due to exemptions, deductions, or tax credits at the time of filing ITR.

In such cases, when the taxpayer files their income tax return and the tax authorities assess their tax liability, they calculate the actual tax liability based on the income and deductions declared. If the assessed tax liability is lower than the tax paid, the excess tax amount is refunded to the taxpayer. Remember, you have to finish e-filing to get your ITR Refund.

For example, if a taxpayer has paid Rs. 15,000 in taxes for the financial year 2023-2024, but their actual tax liability is only Rs. 10,000, they are entitled to a refund of Rs. 5,000 from the Income Tax Department. After filing and verifying the income tax return, the department will begin processing the return. Typically, it takes about four to five weeks for the refund to be credited to the taxpayer’s bank account once the return is processed.

How to Calculate the Income Tax Refund with Example?

Income Tax Refund = Total Taxes paid – Total tax liability 

If the taxes paid (either by way of Advance Tax or TDS or TCS or Self-Assessment Tax) are more than the actual tax amount due, then the excess tax paid can be claimed as a refund. The income tax department will recompute the taxes and validate the refund claim before initiating the refund.

For example: Assume Mr. Goyal paid 3 lakh as an advance tax during the financial year. At the end of the financial year, he learns his tax liability is only 2 lakh. He can request a refund by filing an income tax return (ITR). If the assessing officer approves his request, the excess tax amount of 1 lakh will be credited to Mr Goyal’s pre-validated bank account.

3 lakh Advance Tax – 2 lakh Tax liability = 1 lakh Tax refund for Mr. Goyal

The excess amount will be refunded along with interest at the rate of 0.5% per month or part of the month. If the refund is received in August, then interest of Rs. 3,000 (1,00,000*0.5%*6) will also be credited to the bank account.

Who is Eligible for an Income Tax Refund?

There are many cases wherein you will be eligible for a refund. Some of them are:

  1. If the tax you’ve paid in advance on the basis of self-assessment is more than the tax payable on the basis of regular assessment.
  2. If your TDS from salary, interest on securities or debentures, dividends, etc. is higher than the tax payable on the basis of regular assessment.
  3. If the tax charged, based on regular assessments, gets reduced because an error in the assessment process was resolved.
  4. The same income is taxed in a foreign country (with which the government of India has an agreement to avoid double-taxation) and in India as well.
  5. If you have investments which offer tax benefits and deductions that you have not declared.
  6. If you find, after considering the taxes you’ve paid and the deductions you are allowed, that the tax paid amount is in the negative.

How can I Claim my Income Tax Refund?

The easiest way to file for your tax refund is to declare your investments in Form 16 (life insurance premiums paid, house rent being paid, investments in equity/NSC/mutual funds, bank FDs, tuition fees, etc.) while filing your IT return and submit the necessary proofs.

If you’ve failed to do so and have been paying extra taxes you think you could have avoided, you will need to fill out Form 30. Form 30 is basically a request for your case to be looked into and the excess tax that you have paid is refunded. Your income tax refund claim needs to be submitted before the end of the financial year. Your claim needs to be accompanied by a return in the form (prescribed under section 139).

How to Check Income Tax Refund Status?

1. Through the Income Tax Portal

Step 1: Visit the income tax portal and log in to your account

Step 2: Click on ‘e-File’, choose ‘Income Tax Returns’ and then select ‘View Filed Returns’

Step 3: You can see the status of your current and past income tax returns.

Step 4: Click on ‘View details,’ and you’ll see the status of your income tax refund

2. Through NSDL Portal 

Step 1:  Visit the NSDL Portal

Step 2: Enter your PAN details, select the Assessment Year from the drop-down option for which tax refund is awaited and enter the Captcha Code

Step 3: Click ‘Proceed’ under the ‘Taxpayer Refund (PAN)’ option

3. Through TRACES

Step 1: Log in to the income tax portal

Step 2: Click on ‘e-File’, select ‘Income Tax Returns’ and hit ‘View Form 26AS’

Step 3: You will be directed to the TDS Reconciliation Analysis and Correction Enabling System (TRACES) page, and Click on ‘View Tax Credit (Form 26AS/Annual tax statement)

Step 4: Select the Assessment Year from the drop-down menu, and select view as ‘text’

You are directed to a page that displays the details of the paid refund

FAQs

Due Date to Claim Income Tax Refund?

Income tax refunds must be claimed within one year from the date on which the assessment year ends. However, in certain cases, assessing officers tend to entertain refund claims that were filed after the specified due date.

However if you forgot to file my Income Tax Return within the due date you can file a belated return upto December 31st.

What Does my Refund Status Mean?

S.No

Status

Meaning  

  1.  

No Result Found

This means that, according to the IT department, no records were found for the ITR filed, and the PAN and acknowledgement number added need to be cross-checked.

  1.  

Refund is already credited to your prevalidated bank account. 

This states that the refund is already credited. In case of any doubt, contact:
CMP, State Bank of India 
Address: Survey No.21 Opposite: Hyderabad Central University, Main Gate, Gachibowli, Hyderabad -500019

  1.  

Refund Cheque is already encashed

Your income tax refund is processed and credited to your bank account. If you have not received it, please contact:
CMP, State Bank of India 
Address: Survey No.21 Opposite: Hyderabad Central University, Main Gate, Gachibowli, Hyderabad -500019

  1.  

Refund not determined

According to IT Department, no refund was determined in this case.

  1.  

Unable to credit refund as the account number provided is incorrect

This clearly states that the bank account number provided is incorrect. You need to apply for refund reissue by providing a prevalidated account number.

  1.  

Defective return u/s 139(9) (or) ITR filed is defective or incomplete

This shows that the ITR filed was defective under the Income Tax Law. Please check on the e-filing website to find the correct reason.

  1.  

ITR Processed but need to submit rectification request

There might be a mismatch in the calculation done by department and ITR filed. File a rectification request justifying the refund claimed.

  1.  

Return submitted. ITR Transferred to Jurisdiction AO

This implies the return will be processed by the jurisdictional AO. Contact teh AO and make the necessary submissions to claim the refund.

  1.  

Pending for e-verification

This means that the ITR was submitted successfully but not e-verified within 30 days of ITR submission. Verify to process the return and claim the refund.

  1.  

Processed with no demand/refund

It shows that the ITR is processed without any demand or refund. To understand this, check the intimation order u/s 143(1) on your email id.

  1.  

Processed with demand due

In this case the return is processed and there is demand, i.e. tax payable to the IT department. To understand this, check the intimation order u/s 143(1) on your email id. Also, submit the response to this through the e-filing website under the e-file->Response to Outstanding Tax Demand.

  1.  

Processed with refund due

This implies that the return is processed with refund and it will be credited in some days in the prevalidated bank account.

  1.  

Refund Failure

Due to incorrect bank account details, the refund was not credited successfully. Please apply for refund reissue under “My account” -> Service -> Refund Reissue Request

  1.  

E-Return for this PAN and Acknowledgement Number has been digitally Signed 

The ITR is digitally signed and filed successfully. 

  1.  

Under Processing

This means that the income tax department has still not processed your income tax return. Please check your refund status after a month to see if it has been updated.

  1.  

Refund Issued

This means the income tax department has sent the refund to you (by cheque or by direct credit to the bank account number you provided while e-filing). No further action required.

  1.  

Return Submitted and Verified 

The return is submitted and verified. So, wait for some days for the refund to be credited.

  1.  

Invalid original return, File Revised Return

The return was treated as invalid and there is a need file a revised return to claim the refund.

  1.  

Return Processed and Rectification Rights Transferred To Assessing Office

This implies that the return was processed and transferred to jurisdictional AO. So, filing an offline rectification request to the AO will help you get the refund. We can connect you to an expert who can help you file a rectification.

  1.  

Return Processed. Refund Adjusted Against Demand (or) Refund kept on hold,Intimation u/s 245 is issued proposing adjustment of refund towards outstanding demand.

In this case if any tax payable is outstanding with the department, then the IT department will adjust the refund first against the demand. But before they adjust, a notice u/s 245 will be sent to you for your confirmation. If the response is not submitted the department goes ahed with adjusting the demand. In this case our expert CAs can help you get the refund.

21.

ITR Accepted

ITR is successfully received and pending for processing

22.

ITR-V rejected

This shows that the return filed is defective.

23.

Return Submitted and verified after the due date.

The ITR filed was received after 30 days of filing, so the return needs to be filed again.

24.

Successfully e-Verified after due date

The IT department has received a condonation request filed in respect of the return e-verified after 30 days. The return is transferred to AO and till it is approved, it is treated as invalid.

25.

Rectification processed with refund due

The rectification request is processed with refund.

26.

Rectification processed with no demand/refund

The rectification request is processed successfully with no demand/refund.

27.

Processed and partially refund adjusted

The refund is partially processed by adjusting it with the tax payable in the previous years. However, the department sends the notice u/s 245 to get your confirmation before adjusting.

28.

Under Processing Original return will not be considered, as revised return is taken up for processing

Once a revised return is filed, it replaces the original return filed. So this shows that revised return is under processing.

29.

Another Return filed

Another return was file, check with the other acknowledgement number.

30.

Refund Re-issue failure

Refund reissue request was failed due to some incorrect details. Raise the new request to get the refund.

31.

Rectification filed

Rectification request has been filed and its processing

Income Tax Refund

An individual may end up paying taxes more than they are actually required to. This may be because of tax deducted at source or an incorrect income tax calculation. In such cases, you can claim an income tax refund.

Income Tax Refund arises in case of a mismatch between the tax amount paid and the actual payable amount. If the amount paid is higher than the actual amount payable, a refund is initiated. The Form 30 is used for the same purpose.

The term tax refund refers to a reimbursement made to a taxpayer for any excess amount paid in taxes to the federal or state government. While taxpayers tend to look at a refund as a bonus or a stroke of luck, it often represents what is essentially an interest-free loan that the taxpayer made to the government. It’s often possible to avoid overpaying your taxes so you can keep more money in your pocket each pay check—and avoid a refund when you file your tax return.

How to Claim Income Tax Refund

There is no separate process to claim an ITR refund. All you need to do is file your returns for claiming an income tax refund. If you are eligible for a tax refund, be it claiming a TDS refund, double-taxation refund, or under any other circumstance, all you need to ensure is that you file your taxes correctly and verify your filing.

1.Ensure that you file taxes before the due date. Usually, the 31st of July is the last date to file ITR for individuals.

2.To be eligible for getting a refund, you must file your taxes correctly. Make sure that all the details imputed in the ITR form are correct. Refer to Form 16, Form 24AS, TDS slips from bank interest, self-assessment taxes paid, etc., to make sure you give the correct information.

3.Once you are sure that you have all the right information, the next step is to verify whether you are eligible for a refund.

4.Know the amount of refund you are eligible for. This makes it easy to track the credit you are supposed to receive.

5.Once you file your ITR returns, don’t forget to verify your returns. This is just as important as filing returns. ITR filing verification can be done online or physically. Electronic verification is done via OTP generation linked to your Aadhar or an electronic verification code (EVC) sent to your registered mobile number. Alternatively, you can physically verify your ITR filing by posting a signed copy of the ITR Form V acknowledgment to the CPC within 120 days of filing your returns.

The income tax refund should be credited to your bank account within 45 days of ITR processing. If it takes longer, you should check with the CPC on why it is getting delayed.

How is Income Tax Refund Processed?

The processing of income tax refund is rather straightforward. Once you file your returns, verify the same either electronically or by posting a physical copy of the ITR-V acknowledgment, refund processing will start. The CPC will verify your taxes, check if the tax paid is higher than your tax liability, and begin processing the refund. Once the refund processing is complete, and an income tax refund is generated, it will automatically be credited to your bank account.

Eligibility for ITR Refund

You are eligible to receive an Income Tax Refund from the tax authorities if the taxes you have paid during a fiscal year are more than your actual tax liability. Some reasons why a taxpayer might have paid excess tax are:

1.Advance tax paid based on self-assessment is higher than actual tax liability

2.Tax Deducted at Source (TDS) deduction by employer is higher than the tax liability

3.Error in tax calculation resulting in higher tax payout than actual tax payable

4.Double taxation of income earned in a foreign country

However, in order to get a refund on the excess tax paid, you have to file your ITR correctly and get it verified.

Due Date to Claim Income Tax Refund

Income tax refunds must be claimed within one year from the date on which the assessment year ends. However, in certain cases, assessing officers tend to entertain refund claims that were filed after the specified due date. However if you forgot to file my Income Tax Return within the due date you can file a belated return upto  December 31st.

Here are some points you need to keep in mind:

1.Income tax refund claims will not be considered if six successive assessment years have been completed.

2.The refund amount must be less than Rs.50 lakh for a single assessment year.

3.Interest will not be offered on refund of late claims.

4.If the delayed claims require verification, the assessing officer could reconsider the claim.

Who is Eligible for Income Tax Refund?

There are many cases wherein you will be eligible for a refund. Some of them are:

1.If the tax you’ve paid in advance on the basis of self-assessment is more than the tax payable on the basis of regular assessment.

2.If your TDS from salary, interest on securities or debentures, dividends, etc. is higher than the tax payable on the basis of regular assessment.

3.If the tax charged, based on regular assessments, gets reduced because an error in the assessment process was resolved.

4.The same income is taxed in a foreign country (with which the government of India has an agreement to avoid double-taxation) and in India as well.

5.If you have investments which offer tax benefits and deductions that you have not declared.

6.If you find, after considering the taxes you’ve paid and the deductions you are allowed, that the tax paid amount is in the negative.

How do I Track My Income Tax Refund?

The IT department allows you to track the status of your refund. If your refund procedure has not been completed by your officer in charge, you will receive a message notifying you of the same.

Just follow these two steps to claim income tax refund.

1.Get Refund through Direct Transfer: Excess tax paid can be refunded to you by crediting your bank account with ECS transfer. RTGS/NECS are also used to transfer the tax refund directly into your account, using your 10-digit account number and MICR code, through the State Bank of India. You can track your income tax refund through the http://www.incometaxindia.gov.in website or through NSDL-TIN website by clicking on “Status of Income Tax Refunds”. You will then need to enter your PAN number and assessment year for refund details.

2.Refund by cheque: You can track this with the speed post service that has been tasked with delivering it, using the reference number that the IT department will give you.

Interest on Delayed Income Tax Refund

Under Section 244A of the Income Tax Act, in case the refund payment is delayed, the Income Tax Department is liable to pay interest at 6%. The interest applicable to your refund amount shall be computed from the date on which the tax was paid to the date on which the refund was made.

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