Maximize Your Savings: Claim Back Your Income Tax Refunds in 2025

Claim Your Refund with Ease – Key Steps, Precautions, and Budget 2025 Updates You Need to Know!

Receiving an income tax refund can be a significant financial boost for taxpayers. It's essential to understand what constitutes a refund, the necessary precautions when claiming it, the steps to check your refund status, and the interest the Income Tax Department pays on refund amounts. Recent amendments in the 2025 Union Budget have introduced changes that could impact your refund process.

Understanding Income Tax Refunds

An Income Tax Refund arises when the taxes you've paid exceed your actual tax liability for a financial year. This excess can result from various sources, including advance tax payments, Tax Collection at Source (TCS) on specific expenses, Tax Deduction at Source (TDS) on income receipts, or overpayment of self-assessment tax. To claim this excess amount, filing an income tax return is mandatory.

Process of Claiming a Refund

1. Filing Income Tax Return (ITR): Annually, taxpayers must file their ITR, detailing income earned and taxes paid.
2. Return Processing: The assessing officer evaluates the reported income and deductions to determine the tax liability.
3. Refund Calculation: If the taxes paid surpass the calculated liability, the surplus is identified as refundable.
4. Verification: The tax authorities verify the provided details, ensuring accuracy and compliance.
5. Issuance: Upon approval, the refund is directly deposited into the taxpayer's bank account.

The duration for receiving a refund varies based on factors like the filing date, accuracy of the return, and processing efficiency.

Illustration

Consider Mr. Z, a professional rendering services worth Rs 5,00,000, with clients deducting 10% TDS, resulting in a Rs 50,000 deduction. With no other income, Mr. Z's taxable income falls below the Rs 12,00,000 exemption limit introduced in the 2025 Budget

Therefore, he owes no tax but must file an ITR to claim the Rs 50,000 TDS refund. Once filed, the assessing officer processes the return, and the refund is issued accordingly.

Interest on Income Tax Refunds (Section 244A)

The Income Tax Department pays simple interest at 0.5% per month or part thereof on excess tax payments. For returns filed on or before the due date under Section 139(1), interest accrues from April 1 of the assessment year until the refund is granted. For late filings, interest is calculated from the filing date to the refund date. It's important to note that this interest is taxable under 'Income from Other Sources'.

Precautions When Claiming a Refund

1. Accurate Bank Details: Ensure your bank account is linked with your PAN and Aadhaar.
2. Avoid Excess Claims: Do not claim more than the due refund. If an excess is received inadvertently, promptly revise the return and repay the amount.
3. Reconcile Records: Match Form 26AS, Annual Information Statement (AIS), and Form 16 to verify taxes paid during the year.

Receiving an excess refund can attract interest charges under Section 234D at 0.5% per month on the surplus amount, calculated from the refund date until repayment.

Checking Your Refund Status

After e-verifying your return, refund processing typically takes 4-5 weeks. If delays occur, check for discrepancies in your ITR or notifications from the IT Department. You can monitor your refund status through:

1. Income Tax Portal:
   • Log in and navigate to 'e-File' > 'Income Tax Returns' > 'View Filed Returns'.
   • Select the relevant assessment year to view refund details.
2. NSDL Portal:
   • Visit the NSDL website, enter your PAN, select the assessment year, and submit the captcha code.
3. TRACES Portal:
   • Access through the Income Tax portal by selecting 'View Form 26AS' under the 'e-File' tab.
   • You'll be redirected to TRACES to view your tax credit statement.

Recent Amendments Impacting Taxpayers

The 2025 Union Budget introduced several taxpayer-friendly measures:

• Increased Tax Exemption Limit: The basic exemption limit under the new tax regime has been raised to Rs 12,00,000, with a standard deduction of Rs 75,000, effectively making income up to Rs 12,75,000 tax-free.
• Extended Time for Updated Returns: Taxpayers now have four years, up from two, to file updated returns for any assessment year.
• TDS and TCS Adjustments: The TDS limit on interest income for senior citizens has doubled to Rs 1,00,000, and the TDS threshold on rent has increased to Rs 6,00,000.

These changes aim to simplify tax compliance and provide relief to taxpayers.

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice.