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How to Claim Income Tax Refunds in India: A Guide

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May 10, 2023
5 Minutes

Delve into the intricacies of income tax refunds in India with this comprehensive guide, crafted to enhance your understanding of the procedures, requirements, and timelines involved. Discover how to effectively claim your refund, encompassing areas such as self-assessment tax, Tax Deducted at Source (TDS), foreign tax credit, and advance tax.

Understanding Income Tax Refunds

An income tax refund is a reimbursement issued when taxes are overpaid, which involves direct taxes like self-assessment tax, TDS, foreign tax credit, and advance tax. Once an income tax return is filed, eligible taxpayers are notified via SMS or email about the refund.

The Refund Process: Calculation to Disbursement

Following the filing of a return, the refund process is initiated, with qualified recipients being informed of the refund amount and a unique sequence number as per Section 143(1) of the Income Tax Act, 1961. Refunds are disbursed through RTGS or NEFT to a bank account, or via cheque/demand draft to the registered address.

Claiming Refunds: Various Scenarios and Procedures

Different scenarios necessitate varying procedures to claim a tax refund. For instance, if a taxpayer in the 5% tax bracket encounters a 10% TDS on fixed deposit interest, they can reclaim the excess by filing an IT return and providing KYC details.

Special Provisions for Taxpayers

Individuals over 60 with FD accounts enjoy an interest tax exemption up to Rs. 50,000. Filing Form 15H informs financial institutions of non-taxable income. The income tax e-filing or TIN NSDL website can be used to track refund status for enhanced transparency.

Interest and Deadlines for Income Tax Refunds

State income tax refunds may attract interest if they exceed 10% of the tax paid. The interest rate is 0.5% monthly, calculated from April 1 of each assessment year until the refund is disbursed. If delays occur, the IT Department compensates with a 6% interest rate.

Ensuring Timely Refunds: A Quick Guide

To ensure timely refunds, taxpayers must follow situation-specific procedures and adhere to deadlines. Regularly checking refund status helps maintain an efficient process, enabling taxpayers to receive due refunds without delay.

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