A common query, I came across: is income tax refund taxable? The amount of your income tax refund is the amount of excess tax that you have paid. It is non-taxable since it cannot be included in your income. Let me share more details I know about it below.
Is ITR Refund Taxable?
In India, the income tax refund amount itself is not taxable. It represents the return of excess taxes paid. However, the interest you get on your income tax refund, however, is considered income and is governed by tax laws.
When the Income Tax Department delays the processing of a refund, it compensates the taxpayer by paying interest on the refund amount.
This interest is taxable and must be declared in your income tax return. The interest income is added to your total income and taxed at the applicable slab rate.
Suppose you receive a tax refund of Rs15,000, which includes Rs1,000 as interest. While the Rs15,000 refund is not taxable, the Rs1,000 interest must be reported as income from other sources and will be taxed according to your income slab.
I hope you found this helpful.
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When an individual pays more income tax than the actual income tax liability for a particular year, the excess paid amount gets refunded by the income tax department. This refunded amount is referred to as an ‘Income tax refund’. Now, let me answer your query on “Is income tax refund taxable in India?”
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Is income tax refund taxable in IndiaI want you to know that an income tax refund isn’t taxable because it’s the excess of tax liability paid from the total taxable income considered for tax liability for a particular year.
How you can claim an income tax refundYou can claim the income tax refund easily by filing ITR. I want you to know that the IT department will process the ITR for a refund only after the verification of the ITR through the offline mode (sending ITR-V’s signed copy) or any of the online modes. Moreover, the refund from the IT department is subject to verification/assessment by the IT department. You will receive the refund only if the refund claim is found to be legitimate and valid.
How much income tax refund one can receiveWhen you claim a refund in your return of income, then such a return is processed by the tax department and you would get an intimation from CPC under section 143(1) confirming the refund amount that you’re eligible to get. The refund can either match with or could be lower/higher than what’s claimed in the return of income on the basis of an assessment done by the IT department. This refund amount is what you’d ideally get from the IT department.
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I hope this answers your query on “Is income tax refund taxable in India?”
Is income tax refund taxable?
Farhan
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2022-09-05T13:26:59+00:00 2022-09-05T17:50:43+00:00Comment
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