Income Tax Refund – Mystery

Income Tax Refund – Mystery

With the end of ITR Filing season, now the assessee has starts receiving their claimed refund from Income Tax Department. Individuals who have filed their ITR’s before 31^st August, 2019 has almost received their refunds. Because, this time, to lower the interest burden on government treasury, Income Tax department has processed refund cases on Priority basis.

Sometimes queries received from assessee that, they has timely filed their ITR but refund amount has not been received. To resolve their queries, I had already written an article on this issue with the heading “Re-Issuance of Income Tax Refund – How to Submit Request Online” which is accessible from my profile section, in which reasons of delay in refund received has been described in detail along with its probable solution.

Now I am discussing some Issues, which affects (decrease) your Income Tax refund eligibility, which are as follows

• Mismatch of TDS Credit, as claim by you and detail available in Form 26 AS
• You have under reported your Income but department has received details from external sources about this under reported Income
• You have claimed Excess deduction under Chapter –VI-A, in comparison to its eligibility, which is denied by department while processing your Income Tax U/s 143 (1) of Income Tax Act, 1961
• Adjustment of this year refund amount, with any previous year Tax Demand

If you have timely filed your ITR and everything is Ok in your ITR, then in normal circumstances, assessee received refund amount within 2-3 months of from the date of ITR Filing. When your ITR is processed an intimation U/s 143 (1) of Income Tax Act, 1961 will be sent on mail id mentioned in your ITR and a SMS is also sent on your mobile number. In this intimation, detailed calculation of your assessed Income and Interest amount along with interest allowed on your refund amount is shown. After processing of your refund, details are sent to refund banker for further processing of refund amount. When you received intimation U/s 143 (1) regarding processing of your refund, you can check status of your refund disbursement on NSDL Portal.

Now, I am going to discuss about eligibility of Interest on refund amount. Interest on refund amount is governed by Sec-244A of Income Tax Act, 1961. Interest is payable where any refund arises due to any excess payment of Tax.

Situation 1– Refund is claimed out of TDS, TCS and advance tax – means you have paid you’re taxes before the closing of previous Financial Year. In this situation interest is calculated @ 0.5% per month (part thereof) for the period which is as follows:-

• If return of Income is filed within the due date as prescribed U/s 139 (1) of Income Tax Act, 1961 – then interest is calculated from the 1^st day of assessment year to the date on which refund is granted.
• If return filed after due date – Interest is calculated from the date of furnishing of return of income to the date on which refund is granted.

Suggestion – If you have to claim refund in your ITR, then please file your ITR within due date so loss of interest can be saved.

Situation 2 – Refund is claimed out of self- assessment tax paid U/s 140 A– this situation occurs in exceptional cases, which means you have excess paid your tax liability, reason may be twice payment of same tax amount due to technical issues and now you are claiming refund amount.

• In this situation interest on refund is granted @ 0.5% per month (or part thereof) from the date of furnishing of return of income or the date of payment of self-assessment tax, whichever is later, to the date of grant of refund.

Exception: No interest shall be granted in above situations, if the amount of refund is less than 10% of the tax as determined under 143 (1) or regular assessment.

Cautions: A common error/malpractice has been observed, especially in case of salaried persons, who without knowing the Income Tax provisions, for the purpose of claiming TDS Refund deducted by their employer claim falls deduction under Chapter –VI –A, which may create problem in near future for them.

In the recent time, Income tax department has identified many assessee who are claiming false deduction. Income tax department is aware about these malpractices, so it is suggested that, become an honest tax payer and contribute in nation building.

False claiming of deduction/ under reporting of income may attract penalties under various section of Income Tax Act, 1961.

This article is for the purpose of information and shall not be treated as a solicitation in any manner and for any other purpose whatsoever. It shall not be used as a legal opinion and not be used for rendering any professional advice. This article is written on the basis of the author’s personal experience and provision applicable as on the date of writing of this article. Adequate attention has been given to avoid any clerical/arithmetical error, however; if it still persists kindly intimate us to avoid such error for the benefits of other readers.

The Author “CA. Shiv Kumar Sharma” can be reached at mail –shivsharma786@gmail.com and Mobile/Whatsapp – 9911303737/ 9716118384