Facts about Income Tax Refund

Income tax is a tax imposed by the central govt on individuals or entities who earn money or earn profit more than a certain limit. Income tax is calculated at specified rates on total income of a person and paid directly to the central govt. The provisions relating to the income tax was governed by income tax act 1961.

Paying the income tax is responsibility of every citizen, but while paying the income tax one should be aware of the details about income tax. They should know if they earn enough to pay the tax, if they are paying the right amount of tax, if they are paying more than their tax liability and even if they are doing so, what should be done in this situation?

Income Tax Refund

We have heard the term so many times, but very few people have clear idea about the Income tax return or Income tax refund. What is Income tax refund? How it works?

When a person pays more tax than his/her actual tax liability, then the tax payer can file the return on income tax. This usually happens when the advance tax, self-assessment tax paid or TDS deducted of the taxpayer is higher than the total tax liability of a taxpayer.

Income tax return or Income tax refund is a statement of income and tax thereon, which is to be furnished by a taxpayer to the Income-tax Department in prescribed form. Every year different forms of returns of income are prescribed by the Income-tax Department for different taxpayers having different income from different sources. 

When it is found that the tax payer pays more than his tax liability, the Income Tax Department returns their extra amount of tax. Either they directly return the extra tax amount to the taxpayer’s back account or directly send Cheque to their mail address.

Process to file the Income Tax Return

As per the Income Tax Act 1961, One should file his/her return in the relevant assessment year by July 31 to claim the refund. The FY (financial year) immediately succeeding a financial year is the relevant assessment year for that financial year.

Filing for Income tax refund or Income Tax return can be done online. Your refund is determined by comparing your total income tax to the amount that was withheld for federal income tax. Assuming that the amount withheld for federal income tax was greater than your income tax for the year, you will receive a refund for the difference. For more such details follow the finance related sites on the Internet.