Refunds arise in those cases where the amount of tax paid by a person is greater than the amount which he/she is properly chargeable, as per the Income Tax and other Direct Tax laws. The same is noted under Sections 237 to 245 of the Income Tax Act, 1961.

An income tax refund is a state of reimbursement to a taxpayer when he pays a higher tax in the given financial year (FY) than your final assessed liability. Income tax refunds are possible when you have been paying the compulsory advance tax or have TDS deductions on your income.

At the time of filing an income tax return (or ITR), you can estimate the possible tax refund. The excess tax you have paid will be returned to you as a refund under Section 237 of the Income Tax Act, 1961. The income tax department will sanction the tax refund only after thorough verification of the income tax return filed.

If you get a tax refund, then you likely overpaid your taxes during the previous tax year.

You may also receive a refund if you qualify for a refundable tax credit, such as the Earned Income Tax Credit, premium tax credit, or Child Tax Credit.

A tax bill is the opposite of a tax refund, which you owe if your employer didn't withhold enough taxes from your pay.

It can be exciting to get a large tax refund. You can expect to get a refund if you overpaid your taxes during the year. This generally happens when taxes are deducted from your paycheck every time you get paid by your employer.

If a taxpayer wants to claim income tax refund to get back the excess tax paid in a financial year, filing the Income Tax Return (ITR) is mandatory. Failing to file the ITR in the applicable assessment year will prevent you from getting a tax refund. Neither you can check IT refund status online.

In many cases, the income tax refund amount received by the taxpayers is slightly higher than the amount claimed in their ITRs. This difference is the interest they earn on an income tax refund.

As per income tax refund rules [3], it is mandatory for the Income Tax Department to pay the interest on the refund if it is 10% or more of the tax paid.

Section 244A of the Income Tax Act governs the income tax refund rules and provides a simple interest at the rate of 0.5% per month or part of the month on the income tax refund amount.

The interest is calculated from April 1 of the applicable assessment year till the date of income tax refund transfer, provided the return of income is furnished on or before the due date. In case the ITR is filed after the due date, the interest is calculated from the return filing date.

However, there can be cases in which a specific tax amount is outstanding against the taxpayer who claims an income tax refund.

For example, you might have tax dues for any of the previous years but are eligible for an income tax refund in another year. In such cases, the IT department may not pay you the income tax refund due to you.

However, there can be cases in which a specific tax amount is outstanding against the taxpayer who claims an income tax refund.

For example, you might have tax dues for any of the previous years but are eligible for an income tax refund in another year. In such cases, the IT department may not pay you the income tax refund due to you.

The entire income tax refund procedure depends on the timely submission of ITR. Hence, the time limit to claim the refund is the end of that assessment year.

The amount you receive as income tax refund refers to the excess tax paid by you. It cannot be considered as a part of your income and is thus, non-taxable. However, the interest you receive over the income tax refund is regarded as an income and is subject to taxation rules.

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