How To Claim An Income Tax Refund?

Written by : Knowledge Centre Team

2024-08-02

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You might have come across the term 'tax refund' often. Let us understand what it means. A tax refund is a refund provided to the taxpayer when the taxes paid are more than the tax liability. You are eligible to avail of a tax refund on your income tax if the tax you owe is less than the sum of the estimated taxes you have paid and the total amount of withholding taxes. You also need to include the refundable tax credit that you are claiming into this sum.

These tax refunds are generally paid after the completion of the tax year, and the refunds will be granted only if the tax paid by you exceeds the amount for which you are chargeable, according to the Income Tax and other Direct Tax laws.

Eligibility criteria to claim an income tax refund

You have to meet some criteria to avail of the income tax refund, such as:

The tax that you have paid in advance, based on self-assessment, should be greater than the tax that you need to pay as per the regular assessment.
Your TDS from interest on debentures or securities, salary, dividends, etc., should be greater than tax payable.
You have been taxed for the same income in India and a foreign country (that has an agreement with the Indian Government to avoid double-taxation) as well.
You have been taxed more because of an error in the regular assessment process and which is resolved later, reducing the tax amount that you are liable to pay.
If the tax payable is in the negative, despite considering the deductions you are allowed and the taxes you have paid.
You have investments that offer deductions and tax benefits, which you are yet to declare.

You can avail income tax refund after filing the return of your income. Generally, July 31 of every year, if it is not extended, is the last date to file for an income tax refund. Applying for a tax refund is a simple and seamless process. You will get the refund amount either in the form of a cheque or directly credited into your bank account linked to the Income Tax Department.

Claiming income tax refund

The process to claim income tax refunds has become much easier now. You must know that there is no separate process to claim an income tax refund. You can claim it by filing the income tax return. You also need to ensure that your return is electronically verified through Electronic Verification Code (EVC) and Aadhar number OTP within 120 days of filing the return.

The simplest method to file your income tax refund is to enunciate your investments in Form 16. The investments may include house rent being paid, life insurance premiums paid, bank FDs, investments in equity mutual/NSC funds, tuition fees, etc. Submit all necessary and relevant proofs while filing your income tax return.

If you fail to do so and have been paying excess taxes that can be avoided, you must fill out Form 30, which is a request that your case is looked into and anatomized so that your excess tax amount is refunded. You must submit your income tax refund claim before the end of the financial year.

You must remember that the refund claim is verified by the Income Tax Department and will be granted if it is found to be valid. Also, if you get the verification for your return done earlier, then your request is processed earlier, and the refund is credited soon.

You can also gain tax benefits from buying a term insurance plan. Let us look into the details.

What is a term insurance plan?

Term insurance is the simplest type of life insurance policy. It provides coverage for an individual for a specific number of years in return for regular payment of a premium. If the insurance plan holder dies during the policy, the policy nominees will receive the death benefit as mentioned in the policy inclusion terms.

It is highly affordable, and you can get additional benefits by including riders/add-ons in it. You can avail of a term plan tax benefits if invested in a suitable plan.

Tax benefits of term insurance plan

You can gain several term insurance tax benefits from a term plan. These tax-saving benefits will help you in saving money on the tax outgo and ensures your family's financial future.

Section 80C

All the basic term insurance tax benefits availed by any Indian taxpayer fall under the scope of the Income Tax Act, section 80C. This section is also considered the most popular tax-saving tool. You can avail of tax benefits up to Rs 1.5 Lakh for the regular payments paid after buying the term plans under this section.

One more important thing of note is that the upper limit of tax deductions accessible under this section carries tax benefits on investments in tax-saving Fixed deposits, Public Provident Fund (PPF), etc.

You can increase term insurance tax benefits by investing in a big life cover or a similar tax saver plan for yourself and secure your family members in the long run.

Significant facts related to tax benefits U/S 80C

1. The annual premiums paid for a term insurance plan should not exceed 10% of the chosen sum assured. In case it does exceed, the term plan tax benefits U/S 80C will be applied proportionately.

2. For term plans issued before March 31, 2012, the tax benefits are applicable if the annual premium is under 20% of the sum assured.

Section 80D

It allows tax deductions on the payments paid for health insurance but indirectly provides tax benefits.

You can avail of the benefits under Section 80D if you have chosen health-related plans, like Surgical Care cover, Critical Illness Cover, and similar others. In simple terms, you can increase tax savings with your insurance premiums by choosing these riders and also get health insurance coverage.

Section 10(10D)

Under section 10(10D), other than the tax benefits that you can avail, you and your family members can also save money due to tax exemptions.

In simple terms, the maturity benefit or death benefit received under the term insurance plan is tax-exempt. It is subjected to various conditions provided therein. Generally, these tax benefits have no upper limit, which means that the total amount you or your family members will receive under the insurance plan is exempt from taxes.

As a term insurance plan holder, you must know that tax benefits under section 10(10D) are subjected to certain conditions. The death benefit or maturity benefit under a term plan is exempted from taxes if the premium paid during the policy period is less than 20% of the pre-defined sum assured.

Tracking income tax refund

The Income Tax department allows you to track the status of your refund. A notifying message will be sent to you if your refund process is yet to be completed by the Officer-in-Charge.

Refund by cheque

You are allowed to track the cheque by contacting the speed post service. You have to use the reference number given to you by the Income Tax department.

Refund through bank transfer

The extra taxes that you paid are also refunded through online modes of transfer, such as crediting the amount to your registered bank account by ECS transfer. NECS/RTGS can also be used to transfer your tax refund into your account using your MICR code and 10-digit account number.

You can track your tax refund through the income tax departmental website or by going to the NSDL-TIN website and clicking on 'Status of Tax Refunds'. You will need your assessment year and PAN number for getting the refund details.

Checking income tax refund status

You can check your tax refund status by going to the official income tax e-Filing website and following these steps:

Open the e-Filing website and choose the 'ITR Status' button.
Enter the required relevant details such as your Acknowledgement number, PAN number, and captcha code and submit the details.
The current status of your tax refund will be displayed on the screen.

Checking the refund status on NSDL/TIN website

You can check the TIN's (Tax Information Network) official website for the tax refund status by following these steps:

Go to the official website of TIN and provide the required details, including Assessment year, PAN number, and captcha.
Click the submit button to view the current refund status.

Thus, you can claim an income tax refund if you have paid more than what you need to, and track your tax refund until it reaches you!

How to Avail Tax Deductions under Section 80C?

How to e-Verify your Income Tax Return Using AADHAR Card – EVC?

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