Refund of Income Tax

Under the Income Tax Act 1961 (the Act), if a person satisfies the concerned Assessing Officer (AO) that the amount of tax paid (such as by way of TDS/TCS, Advance Tax, Self-Assessment Tax etc.) by him/her/it (or on behalf/treated as such) for any assessment year exceeds the amount otherwise properly chargeable to income tax under the Act for the said year, such person shall be entitled to a refund of the excess.

Refund on Appeal etc.

As a result of any order passed in Appeal or other proceeding under the Act, such refund otherwise due (and for which no separate claim would generally be required) to the concerned Assessee, may be subject to the following —

  • Where an Assessment is set aside or cancelled and an order of ‘fresh Assessment‘ is directed to be made, the refund (if any) shall become due only on the making of such fresh Assessment;
  • Where the Assessment is annulled, the refund shall become due only of the amount (if any) of the Income Tax paid in excess of the tax chargeable on the Total Income returned by the Assessee.

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How to Make a Claim

Where an Income Tax Return(s) has been filed and accepted for processing by the Income Tax Department for the relevant Assessment Year(s), a refund could be claimed through the prescribed Income Tax Return (ITR) e-Form(s) used for such purpose, and Form no.30 otherwise prescribed under the Income Tax Rules 1962 (the Rules as amended) may not be necessary.

> No such separate claim for a refund of excess taxes would be required generally, where such amounts become due to the concerned person as a result of any order passed in appeal or other proceeding under the Act.

Time for Refund and Condonation for Delay

A claim for an Income Tax refund has to be made within 1 year from the last day of the relevant Assessment Year.

  • Depending on the quantum of the refund claim and subject to the satisfaction of some prescribed conditions, various Income Tax authorities have been empowered to condone delay in making such claim (including a ‘supplementary‘ claim) for refund of Income Tax
  • No condonation application for such claim of refund (or loss) would be accepted beyond 6 years (for refund claim pursuant to a Court order, period for which any relevant proceedings were pending before any Court of Law to be ignored) from the end of the relevant assessment year for which the said application/claim is made

Interest* on Refund

The Act under section 244A, entitles the concerned Assessee/claimant simple interest (at the rate of one-half per cent for every relevant month or part thereof) on refunds in addition to the said amount due back for the relevant period(s), with such interest quantum calculated in accordance with the said provision and satisfaction of conditions therein prescribed.

*Via section 244A(1A), in a case where a refund arises as a result of giving effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264, wholly or partly (otherwise than by making a fresh assessment or reassessment), the said Assessee/claimant shall be entitled to receive, in addition to the simple interest payable above mentioned, an additional interest on such amount of refund calculated at the rate of 3 per cent per annum, for the period beginning from the date following the date of expiry of the time allowed to give effect to such order to the date on which the refund is granted.

Interest Ineligibility and Delay

The above said provision also denies such interest, if the amount of the relevant refund is less than 10 per cent of the tax as determined under section 143(1) or on ‘regular assessment’ (scrutiny) under section 143(3) of the Act.

Further, where the proceedings resulting in the said refund are delayed for reasons attributable to the Assessee/claimant (whether wholly or in part), the period of the delay so attributable shall be excluded from the period for which interest is payable.

Finance Act 2017

ITR processing and Scrutiny Notice – section 143(1D)

The provisions of section 143(1D) of the Act (as substituted by section 68 of the Finance Act 2016) which allowed the non-processing of ITR when a relevant ‘scrutiny’ notice under section 143(2) had been issued to the concerned Assessee, have been disabled and do not apply to ITRs furnished for Assessment year 2017-18 onwards.

Withholding of Refund in certain cases – section 241A
(new provision)

For Assessment year 2017-18 onwards, where a refund of any amount becomes due to the concerned Assessee under section 143(1) of the Act and the concerned Assessing Officer (AO) is of the opinion (where a ‘scrutiny’notice under section 143(2) has been issued for the relevant ITR) that the grant of the refund is likely to adversely affect the revenue, may for reasons to be recorded in writing and with the previous approval of the Principal Commissioner or Commissioner (as the case may be) withhold the said refund up to the date on which the Assessment is made.

Refund – Set-Off

Under section 245 of the Act, where an Income Tax refund is found to be due to any person, the prescribed Income Tax authority may in lieu of payment of the said refund, set off such amount (any part thereof) against the sum remaining payable by the said person under the Act, after giving an intimation in writing to such person of such set-off action proposed to be taken.

> Read more about ‘Denial/Delay of Income Tax Refund – Non-Processing of Income Tax Returns under Scrutiny’

Useful Links and Guides

  • Income Tax Helplines (link)
  • Tax Refund Status Check (link)
  • Request for Refund Re-issue (link)
  • Refund Re-issue User Guide (pdf)

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Administrative Help

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