Taxes play a vital role in keeping the economy healthy. It is a significant source of revenue for any government. Different tax laws are created to guide how taxes must be charged in different scenarios. Both individuals and business corporations have to pay some type of tax. The tax liabilities can vary greatly depending on the industry, nature of employment, annual income, turnover, etc. People and corporations are also eligible for tax returns and refunds as per the terms stated in the tax laws. However, it is a complex matter, especially for caproates. Opting for tax advisory services can offer detailed insights into tax returns and refunds. Read on to learn more about tax returns and refunds.
What are tax returns are refunds?
Tax returns and refunds can be defined as a refund or rebate offered to taxpayers when the total tax liability is less than the taxes paid. An income tax refund is provided to taxpayers when their annual tax obligation is less than what they have already paid as taxes (from income) during the year. It is important to note that you are only eligible to pay taxes if you file income tax returns. The exact process for claiming the tax refunds can vary based on the country’s tax laws. Most people are unaware of the tax returns and refund benefits. According to the Indian Income Tax Act, people must file their income tax return on or before 31st July (unless the deadline is extended) to claim a refund.
Who is eligible for an income tax refund?
Now that we have a fair idea of what income tax refunds are, let’s take a quick look into the eligibility. Here are some popular scenarios where one can claim a refund on income taxes.
- If the tax paid based on self-assessment is higher than the actual tax liability
- If the Tax Deduction at Source (TDS) (from Salary or other income) is greater than the tax payable for a given year
- If the taxes obligations computed were higher due to an internal error and are resolved later
- If the income is taxed in India as well as a foreign nation (by failing to adhere to the double-taxation avoidance agreement)
- If the investments offering tax benefits are not taken into account
How to claim an income tax refund?
The process of claiming an income tax refund is simple. However, computing the exact refund amount you are eligible for is complicated, and it’s best to seek professional guidance. To qualify for an income tax refund, you must file an income tax return for a given year. The digital India initiative launched by the government has offered the convenience of filing income tax returns online.
One can use form 16 to declare all investments while filing an IT return to claim tax refunds. It can include details of investments related to insurance premiums paid, mutual funds premiums, etc. In case you have failed to do so, you can avoid paying extra taxes by filling up form 30. It helps to put out a request to tax authorities to avoid additional taxes.
How is the income tax refund processed?
The authorities process the income tax refund amount for tax account holders at the Centralised Processing Centre (CPC) in Bengaluru. These returns are processed only after the annual ITRs are filed by the person. The IT refund bankers are responsible for processing the respective refunds.
How is the income tax refund made?
There are two methods for returning the income tax refund amount, and these include the following.
- Direct bank account transfer
One of the most common methods of transferring tax refunds is through the direct bank account transfer method. RTGD, ECS, NECS and similar payment methods are used to transfer the tax refund directly into the beneficiary’s account. One can easily track the status of their refund by visiting the NSDL-TIN website. You will have to enter the PAN details and assessment year to access the same.
- Refund by cheque
Another popular method used to issue the income tax refund amount is by cheque. You will need to obtain the details of the speed post service and the tracking ID to keep a tab on its status.