4 Things To Know About Income Tax Refund

By Adhil Shetty | July 6, 2017

Here Are 5 Things To Know About Income Tax Refund

Benjamin Franklin once remarked, “nothing is certain in this world except death and taxes.” Though most tax payers may find filing taxes tedious, there are some positives like tax refunds that one can look forward to, if eligible.

Income tax returns, filed at the end of a financial year, are essentially a process by which you show the taxes paid on your income. Sometimes, you end up paying more taxes than you are liable to. This generates a tax refund for you, which the Government pays back.

Tax filing is no more a tedious process with the e-filing or electronically filing option available. This can be undertaken by any taxpayer who is liable to pay taxes. It is however mandatory for people with an income of Rs. 5 lakhs and above, people owning assets abroad and those whose income needs to undergo an audit.

e-filing has advantages over paper(physical) filing as being safe and secure, it offers the flexibility of filing your returns anywhere / anytime using the internet. The process is faster and tax calculation is done automatically.

Let us take a look at some of the situations where you may be eligible to receive a tax refund and how to claim it.

How It Works

The excess tax may have been paid because of the following reasons:

You Did Not Fill Up Form 15G In Case Of Fixed Deposit: In case of Fixed Deposits (FD), taxes are deducted from the interest generated. If you haven’t filled up form 15G, the banks deduct tax at source. This doesn’t mean that you have no liability on the interest on FD, but you have to pay it at the end of the year. At the end of the financial year, you have to add the interest earned on the FD to your income and pay taxes as per the tax slabs you fall into.

Now if your total tax liability at the end of the financial year is less than the tax saving done in the year, you become eligible for a refund.

Your Employer Doesn’t Factor In Your Savings Because You Did Not Declare It In The Beginning: Employees are supposed to fill up an investment declaration form, which shows your plan for tax savings. Many employees do not mention it while filling up the form because they are not sure of their investments. The company calculates your tax liability based on the income earned and your proposed investment for tax savings. Since, you did not mention any tax saving investment, the employer deducts taxes taking your income without any tax savings. This increases the outflow. However, before the financial year if you invest in tax saving instruments, this should result in a tax refund because you paid more taxes.

You Earn As A Freelancer With Your Clients Deducting 10% TDS: When you work for a client on freelance basis, the client deducts 10% as TDS which is paid against your income. Sometimes, it may happen that at the end of the year, you have paid more taxes than you should. This will make you eligible for a refund.

The Process Of Tax Filing And Subsequent Refunds

For filing your income tax returns, you can either consult a CA or do it on your own by July 31. Once you e-file the returns, an acknowledgement receipt will be generated. You have to take the print-out and sign at the designated space and send it to the income tax department. The address is mentioned in the document itself. Alternatively, you can e-verify your return. It is also important to note that this is not required if you have registered your digital signature. This step holds importance as without this step, the ITR process remains incomplete and no refunds can be claimed.

As soon as the income tax department receives the acknowledgement, it does its own analysis on the authenticity of the refund and then proceeds. The refund is usually issued in 3-4 weeks’ time though it may even take 4-8 months. Generally, the refund is directly deposited in your account. However, if there is some problem, the I-T department sends a cheque to your address, which you can deposit in your account.

The government has now made it mandatory for you to link your Aadhaar with your PAN. You may not be able to file your returns unless you link both the cards.

(The writer is CEO, BankBazaar.com)

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About Adhil Shetty

Adhil Shetty is the Founder and serves as the Chief Executive Officer of BankBazaar.com. Adhil has a Master’s degree in International Relations with a specialization in International Finance and Business from Columbia University in the City of New York, and a Bachelor’s degree in Engineering from the College of Engineering Guindy, Anna University. Adhil is an expert in Personal Finance (Car loan/Home loan and personal loan) and he majorly consults on investment and spends rationalization for the Indian loan borrowers. His guidance is number based with real time interest rate calculations and hence useful for consumer’s real time query.

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