Let’s be real, Income tax is scary.
Every year, as the financial closing month rolls in, the earning population everywhere gets anxious. People begin to ask and provide all kinds of answers about how to save tax. Refunds, TDS, forms, and the budget become the most discussed topics all over the country.
There are so many forms to fill, details to vet, documents to present. Every action demands precision when you are filing tax. Blink, and you may miss a minute instruction and end up overpaying.
That’s why we’ll begin with the most basic question so that you can better understand the income tax refund procedure.
What Is Tax Refund?
It’s quite possible that the total tax amount you paid in advance, or that was paid by an employer on your behalf after deducting the same from your salary, is more than what you stand to pay.
In such cases, by the Section 245 and Section 237 of the Income Tax Act, 1961, you will be reimbursed for the extra amount.
Other scenarios where you may be eligible for the same include:
- Your income has been taxed in two countries, and the Indian government has an agreement with the country in question to avoid double taxation
- You neglected to declare investments which offer deductions and tax benefits
- There was an error in the assessments and the tax charged on you was reduced after a revision
If you are wondering how to save tax, refund is not the direct answer. Instead, if you do qualify to receive something back, consider investing it in different venues to gain profit from it.
How to Get Income Tax Refund in India?
The motive here is to avoid paying more than what you owe. So, sorting through your assets and investments and declaring them while filing your returns is the first step.
After you have finished filing the ITR, the tax department will go through every information you have provided and process your paperwork to make sure you haven’t paid more than required. If you have, the refund will be sent to you by the medium(cheque, draft, or electronic clearing system) you have specified in the forms.
You can also use the Form 30, which is essentially a request to the ITR department to look into your files and pay back the excess tax. Of course, you will have to attach the copy of your return as an evidence of your claim. Also, the tax you paid should be reflected in your 26AS credit statement form, otherwise the refund claim will not be considered.
How to Save Tax Refund from Getting Lost in the System?
The procedure takes about three to six months to go through, generally. If you have received no word about it for over six months, you should log in to National Securities Depository Limited(NSDL) with your PAN number. You’ll find the status of your tax refund.
How to save the tax refund from being canceled? Well, go through the reasons listed on the website and resolve them. If the website mentions that your claim has expired, returned, or been paid, and you still haven’t received any money, the chances are that:
- The cheque has expired
- The address for demand drafts or details of the electronic transfer aren’t accurate
- The bank that’s processing the transfer has experienced a delay in the process
- Log into your tax e-filing portal, request for reassessment, or refill the right details in the right places.
Things to Do after You Receive the Tax Refund- How to Save the Money?
In case there was a delay in issuing your refund, you’ll be getting certain interest month-wise on the amount. However, once you do get the tax refund, how to save it and utilize it most effectively becomes your prime concern.
- If you still have not figured out how to save income tax refunds, here are a few tips to help you.
- If you have an outstanding loan that doesn’t impose any fine for paying early, clear it
- Invest in a retirement fund, emergency fund, or insurance
- Create a savings account for a certain future point (a vacation, a fund for a child)
- Take care of a looming need, like home improvements, an inefficient appliance(s) that needs repair, etc.
You should also ask your IT advisor, if you have one, about tips to save refunds & taxes. How to keep the money in your bank while making sure you pay the correct amount to the government is surely the forte of an expert in the field. They’ll be able to guide you better about the matter while keeping your particular situation in mind.