ITR refund: 5 income tax rules you should know

Income tax return: Taxpayers filing ITR within or after the due date are eligible for ITR refund

ITR refund: Due date for income tax return (ITR) filing for AY 2022-223 is gone and those who have filed their I-T return on or before 31st July 2022, have either got their ITR refund or they are waiting for their ITR refund. However, for those earning individuals who failed to file their ITR within the given due date, they can still claim ITR refund by filing their I-T return within ITR filing last date of 31st December 2022. However, such taxpayers won’t get interest on their ITR refund form 1st April 2022. Similarly, if a taxpayer is getting ITR refund, its principal amount is non-taxable but the interest on ITR refund would be considered income in FY23 and it has to be added in the net annual income of the taxpayer while filing ITR for AY2023-24.

Speaking on the income tax rules in regard to ITR refund, Mumbai-based tax and investment expert Balwant Jain said, “If a taxpayer has missed to file ITR within the given due date for ITR filing, one can still file its ITR paying late fee. One who filed ITR after 31st July 2022, he or she won’t get interest on one’s ITR refund from 1st April 2022.” Balwant Jain went on to add that a taxpayer’s ITR refund is not an income but the interest earned on the ITR refund is one’s income and one needs to add this interest in one’s annual income while filing income tax return for AY2023-24.

On how interest on ITR refund is calculated, SEBI registered tax and investment expert Jitendra Solanki said, “Interest on ITR refund is calculated month on month at monthly interest of 0.50 per cent. At the same time Section 234D of the income tax act provides for levy of interest on excess refund granted to the taxpayer.” He said that any fraction of a month shall be deemed to be a full month and the interest shall be so calculated.

Here we list out 5 income tax rules in regard to ITR refund that you should know:

1] Eligibility: Taxpayers filing ITR within or after the due date are eligible for ITR refund.

2] Interest on ITR refund: If a taxpayer has filed ITR within the given due date of 31st July 2022, he or she will get interest on one’s ITR refund from 1st April 2022.

3] Interest rate on ITR refund: A taxpayer filing ITR within the given due date is eligible for monthly interest of 0.50 per cent on one’s ITR refund amount.

4] Taxation rules on ITR refund: ITR refund amount is an income that taxpayer has already reported in the concerned financial year. So, ITR refund amount is non-taxable. However, interest earned on the ITR refund amount is taxable as per the income tax slab applicable on the taxpayer after adding the interest amount with net annual income of the individual.

5] Interest calculation on ITR refund: While calculating interest on ITR refund, any fraction of month would be treated as one month whereas any fraction of one hundred rupees shall be ignored. For example, If we want to compute interest on ₹8,489 for 3 months and 10 days, then while computing the amount liable to interest, any fraction of ₹100 is to be ignored and, hence, we will ignore ₹89 from ₹8,489 and the balance amount will come to ₹8,400, thus interest under section 234D will be computed on ₹8,400. Further, the period of 10 days will be considered as full month and, hence, interest will be computed for 4 months.

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