Technology has induced adeptness in even the most complex processes like the current filing of Income Tax Returns (ITRs). As opposed to queuing up before offices, taxpayers can file their ITRs online, thus, ensuring quickness and ease of the procedure. More than 1 crore people have already filed their ITRs, by June 26 this year, with some of them even eagerly awaiting their income tax refund within a few weeks.
In a tweet, the Income Tax Department shared, “Over 1 crore ITRs have been filed till 26th June this year compared to 1 crore ITRs filed till 8th of July last year,”
Taxpayers were also encouraged by the Income Tax Department to submit their ITRs in advance to avoid the rush during the final moments.
Is income tax refund taxable?
However, this leads to a very pertinent question “Is the income tax refund taxable?” There is a misconception among some individuals that the income tax refund credited to their account is subject to taxation. However, it is not true. The refund credited to the taxpayers’ accounts is not subject to tax, though any interest earned on the refund amount may be taxable. This is because the interest earned on the refund amount would be treated as “Income from Other Sources”.
Hiren Thakkar, Chartered Accountant Proprietor, Hiren S Thakkar & Associates reiterates the Income Tax guidelines that state, “Where the refund arising to the taxpayer is out of any TDS/TCS or tax paid by way of advance tax, then the taxpayer shall be entitled to interest calculated at the rate of 0.5% for every month or part of a month. Interest shall be allowed for a period commencing from the 1st day of April of the assessment year to the date on which the refund is granted if the return is furnished on or before the due date of filing of return specified under Section 139(1) otherwise interest shall be allowed from the date of furnishing of return of income to the date on which the refund is granted.”
For the unversed or first-time taxpayers, those who have made an excessive tax payment to the Income Tax department, or if the amount of tax deducted at source (TDS) exceeds their total tax liability for a particular financial year are entitled to receive a tax refund.
To claim their income tax refund, taxpayers must declare their investments in Form 16 when filing their ITR forms. This includes providing details of payments such as life insurance premiums, rent payments, investments in equity/NSC/mutual funds, bank fixed deposits, tuition fees, and more, along with the required supporting documents. However, those who have overlooked these declarations and have been paying excess taxes that could have been avoided will need to complete Form 30 to initiate the refund process.