Income Tax Refunds & Rectification

An income tax refund occurs when the amount of tax paid by an individual or entity exceeds the actual tax liability for the year. If you have paid more tax than required through either advance tax, TDS (Tax Deducted at Source), or self-assessment tax, you are eligible for a refund.

How is the Refund Processed?

Filing the ReturnTo initiate the process, you must file your income tax return (ITR), declaring your total income and taxes paid.

Processing by the Income Tax DepartmentAfter submission, the Income Tax Department reviews the ITR. If the tax paid is higher than the tax liability, a refund is issued.

Refund StatusOnce processed, you can track the refund status online through the Income Tax Department’s website or the e-filing portal.

Use the Refund Status under the “My Account” section to check the status.

Mode of RefundThe refund is typically credited directly to your bank account, provided the details are accurately mentioned in your ITR.

Timeline

Refunds generally take 2-6 months after the processing of the return.

In cases where there is no scrutiny, the refund is processed faster.

6. Factors that May Affect Refund

• Discrepancy in Bank Details: Incorrect bank details may delay the refund.
• Return Scrutiny: If the return is selected for scrutiny, it may delay the refund.
• Outstanding Dues: If you have any pending dues with the tax department, your refund might be adjusted against those dues.

2. Rectification of Income Tax Return

Rectification refers to the process of correcting any mistakes or errors in the filed income tax return (ITR) after it has been submitted. This process can be initiated if:

• Mistakes in the Return: The return has errors in personal details, income, deductions, tax payments, etc.
• Mismatch in Tax Credit: If the details shown in Form 26AS (tax credit statement) do not match with what you have claimed.
• Non-inclusion of Income: You missed reporting some income or didn’t include deductions or exemptions.

Steps for Rectification:

• Login to e-Filing Portal: Go to the Income Tax e-filing website and log in to your account.
• Rectification Request: Choose the “Rectify Return” option from the dashboard.
• Select the Relevant Assessment Year: You will need to select the assessment year for which you want to rectify the return.
• Reason for Rectification: You must select the reason for the rectification. Common reasons include:
  • Non-receipt of refund
  • Adjustment of tax credits
  • Incorrectly claimed deductions
  • Changes in income reported
• Submit the Rectified Return: After making the necessary corrections, submit the rectified return.

Types of Rectification:

• Section 154 Rectification: This is the main provision used for rectification. It can be applied in cases of simple computational errors, such as mistakes in the addition or subtraction of income.
• Rectification under Section 155: This applies if a mistake is found in the assessment order itself.

Time Limit for Rectification:

The rectification process should be done within 4 years from the end of the relevant assessment year.

Important Points:

• Rectification is generally used for minor mistakes like calculation errors, wrong carry-forward of losses, or missed tax credits.
• The income tax department will process the rectified return and issue a refund if necessary.

Common Scenarios for Rectification:

• Mismatch of Tax Credit: If the income shown in your Form 26AS doesn't match the income reported in your ITR, you can file for rectification.
• Errors in Deduction: If you missed claiming certain deductions like 80C, 80D, etc., rectification is possible.
• Data Entry Mistakes: If the return has an obvious error such as incorrect personal details or income figures, rectification is allowed.