Refund of taxes under the Income Tax Act,1961

WHEN RIGHT TO CLAIM REFUND ARISES [Sec. 237]

Where any person satisfies the Assessing Officer that the amount of tax paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under this Act for that year, he is entitled to the refund of the excess amount paid.

WHO CAN CLAIM REFUND? [Sec. 238]

  1. Usually, refund can be claimed by a person who has made excess payment of tax. If the income of a person is included in the total income of another person u/s. 60 to 64, the refund can be claimed by the latter and not by the former. Where a person cannot claim any refund because of his death, incapacity, insolvency, liquidation or other cause, his legal representatives or the trustee or guardian or receiver, as the case may be, will be entitled to claim and receive such refund for the benefit of such person or his estate.
  2. Where the value of fringe benefits provided or deemed to have been provided by one employer is included under any provisions of Chapter XII-H in the value of fringe benefits provided or deemed to have been provided by any other employer, the latter alone shall be entitled to a refund under this Chapter in respect of such fringe benefits.”.
  3. Where through death, incapacity, insolvency, liquidation, or other cause, a person is unable to claim or receive any refund due to him, his legal representative or the trustee or guardian or receiver, as the case may be, shall be entitled to claim or receive such benefit of such person or his estate.

HOW TO CLAIM REFUND [Sec. 239]

Refund claim should be made in Form No. 30 and verified in the prescribed manner. In the following cases, where an otherwise valid refund claim u/s. 237 is filed by an assessee after the expiry of the time limit, the Assessing Officer, may admit the refund claim if the following conditions are satisfied-
1. The refund arising as a result of tax deducted at source in respect of the assessment year under the provisions of section 192, 193, 194, 194A, 194B, 194C, 194D and 195 does not exceed Rs.10,000;
2. the income returned is not a loss where the assessee claims the benefit of carry forward of the loss;
3. the refund claim is not supplementary in nature; and
4. the amount of the assessee is not assessable in the hands of any other person under any provisions of the Act.Moreover, the A.O. is authorised to admit belated return claims upto ` 10,000 where the following conditions are satisfied –
(i) the refund arising as a result of excess advance tax payment in respect of assessment year under the provisions of sec. 208, does not exceed ` 10,000;(ii) the returned income is not a loss, where the assessee claims the benefit of carry forward of the loss;
(iii) the refund claimed is not supplementary in nature, i.e. a claim for an additional amount of refund after the completion of the original assessment for the same assessment year; and
(iv) the income of the assessee is not assessable in the hands of any other person under section any provisions of the Act.

REFUND ON APPEAL [Sec. 240]

The Assessing Officer shall refund the amount to the assessee without his having to make any claim in this behalf.

However, if due to the order passed in the appeal, an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of fresh assessment.

Further, if due to the order in the appeal, the assessment is annulled, the refund become due only of the amount, if any, of the tax paid in excess of the tax chargeable on the total income returned by the assessee.

SET OFF OF REFUNDS AGAINST THE REMAINING PAYABLE [Sec. 245]

Where a refund is found to be due to any person, the tax authorities may, in lieu of payment of the refunds, set off the amount of refund against the sum payable under the Income-tax Act.

INTEREST ON REFUND [Sec. 244A]

Interest on Refund of Income Tax: Where a refund of any amount becomes due to the assessee under the Income Tax Act, he shall be entitled to receive, in addition to the said amount, simple interest on the refund calculated in the following manner:

(a) Where the refund is out of any tax deducted at source/ tax collected at source or advance tax paid during the financial year, interest will be paid at the rate

of ½%, per month or part of a month from the period starting from 1st day of April of the assessment year to the date on which refund is granted is granted.   However, no interest shall be payable if the amount of refund is less than 10% of the tax determined u/s 143(1).

(b) In other cases, interest shall be paid @ ½% per month for every month or part of the month for the period commencing from the date of payment of tax or penalty to the date on which refund is granted.

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