Steps to get Tax Refunded, if you paid excess tax

In the process of tax filing, we normally feel that we are paying taxes in excess than our actual liability, including interest. When you file for income tax, you declare your income from all the various sources and claim tax deductions if there are any. These would include the various items allowed under Section 80 of the Income Tax Act, like life insurance premiums, interest on education loan, for example. There are a plethora of other expenditures or cash disbursements that can help you save on taxes in a year.

On the other hand, throughout the year, we pay taxes in various forms and some of these modes are advance payments. Such advance payments can include advance tax, tax deducted at source (TDS), self-assessment tax, among others. When you have paid more tax than is actually due, you can get any excess tax paid back as a refund. 

Let us illustrate the income tax refund with an example. Suppose you are working as a freelancer or consultant with an organization. In most cases, when you raise an invoice for your work, the organization you represent will pay you after deducting a standard 10% on your fees or invoice amount. This means that you are already paying a certain sum out of your freelancing income. Further, if you have deposits with the bank and other financial instruments, the tax might be deducted at source on your interest income. Now, you can arrive at the total amount you have already paid as tax. 

Comparing the two figures above, you can see if you are supposed to pay more in the form of taxes or if you have already paid excess tax and should seek tax refunds on the excess amount. 

How to get tax refunds?

Claiming tax refund is simple and is a part of the process for filing your income tax return. There is no separate documentation procedure here. In a particular assessment year, you need to file your tax returns by July 31st of the year. This deadline is often extended but it is advisable for you to keep July 31 as the reference date. Since claiming your tax refund is part of the same process, you just need to ensure that the ITR is filed properly. 

What does a proper ITR filing encompass?

Your income tax returns can be filed online on the portal in two ways - you can either upload the filled excel/java utility form that contains the required information or provide the same data in the online form. This online form comes pre-filled in accordance with the details furnished by employers, banks, contractors, etc. So, the details pertaining to salary, interest, and the associated advance tax or TDS are all pre-loaded in such forms. This is also where you will add items for claiming deductions or exemptions as per the provisions of the Income Tax Act. The final computation of the income tax can be found under the ‘Taxes paid and Verification’ tab. 

Once you have declared all the income sources and all the exemptions and deductions, you need to submit the return so filed and verify the submission. This verification is done either through an OTP that is connected to your Aadhar number or through an EVC that is generated via your bank account. Also, it can be verified in the good old physical mode by posting the acknowledgement of the ITR-V to the Centralised Processing Centre (CPC). This should be done within 120 days of when you file the return online on the portal of the income tax department. 

In any case, an intimation will be sent to you by the Income Tax Department once it has processed your return. The outcome could either be that your tax calculation matches the amount in of their records and accordingly either no tax will be payable by you, or you will receive a refund of the excess tax paid.

Things you should know while filing your ITR for refund purpose

• Verify your ITR as soon as possible
  Even though you have 120 days from the date of ITR filing to verify the return, you should keep in mind that the sooner you do so, the earlier you will receive your tax refund. When you send the ITR for verification early on in the process, the CPC will verify and then process your return as soon as possible. The further you delay the verification, the further you push the receipt of return. 
• Pre-Validate your bank account
  In order to receive the tax refund, you also need to make sure your bank account is pre-validated, that it is linked to your Aadhar card and PAN. 
• E-Verification for Documents
  It should also be kept in mind that verification can be done both online and offline. However, e-verification is both faster and more convenient in comparison to the physical mode of sending your documents over. In fact, the increasing emphasis on digitisation means that you will soon only have the electronic option available. 
• Understand Your Refund
  If the refund amounts to more than 10% of the tax paid, your refund amount will include the refund amount combined with interest at the rate of 0.5% per month.  

One final word of advice is to regularly track the status of your refund if you have claimed it in the return filed. There are certain instances where the refund is not processed due to inaccurate information, so regular tracking will help you attend to such issues at the earliest. You can track these details either using personal details like PAN, the acknowledgement number for your e-filed IT return, and captcha code or you can use your login credentials and peruse the ‘Income Tax Returns’ tab.

In addition to claiming your refunds, tax deductions can go a long way in decreasing your overall tax burden. You can claim various deductions and exemptions by investing in a select few instruments like life insurance or term insurance. You can also browse the website to know more about the various Term Plans on offer from PNB MetLife.

The income tax is levied on all earning individuals who fall under a taxable income bracket. The income tax is paid to the Government of India and is charged annually. However, there are several tax deductions and exemptions that you can claim to lower your tax liability. The Income Tax Calculator helps you ascertain your tax output for a financial year based on your taxable income. This can help you plan well and save tax using the tax-saving deductions and exemptions, if possible.