Category "Business"

Tax refund is the amount, which the tax department gives back to a taxpayer who has paid excess taxes.

How does a tax refund arise?

As mentioned earlier, tax refund arises due to excess payment of taxes to the government.

From a salaried individual’s point of view, tax refund generally arises when the employer deducts excess taxes from his salary.

How to claim tax refund?

You need to file an income tax return to claim your tax refund. The amount of refund receivable is computed and shown in the tax return.

Am I eligible for interest on my tax refund?

If the amount of refund is more than 10 per cent of the total tax payable for that particular year then you are entitled to receive simple interest on your tax refund.

Interest is computed @ 0.5 per cent per month on the amount of refund. The interest is computed from the beginning of the next financial year till the date of grant of the refund.

Is the refund taxable?

The tax refund is not your income as it is just a receipt of excess taxes paid and therefore the amount of refund is not taxable.

However, interest received on tax refund is taxable.

The rate of tax would be as per your applicable slab rate. You may include it in the taxable income of the year in which such refund is received.

In order to claim tax refund is it necessary that tax return should have been filed within the due date?

No.

You can claim tax refund even if you have filed a belated tax return (a return filed after the due date is called a belated return)

Generally, how long does it take to receive the refund?

If you have filed your return electronically, then in most cases the refund is issued within 4 to 8 months of the date of filing.

If the return in filed physically at the jurisdictional tax office then it often takes much longer to process.

What to do if you do not receive your tax refund?

If you have e-filed your return and you do not receive your tax refund within a reasonable time you can follow up with the Centralized Processing Centre (CPC) of the Income Tax Department on the contact number provided on the e-filing portal of Income Tax Department. The numbers are 1800 4250 0025, and 080-2650 0025.

If it is still not redressed, or if you have physically filed the return, then you may write a letter to the jurisdictional Assessing Officer. Lastly, you can write to the Jurisdictional Commissioner of the Income Tax with a copy to the Grievance Cell and the concerned Income Tax Officer. This letter may be accompanied by the copies of previous letter/s written to the Income Tax Officer and a copy of the tax return filed.

How is the refund received?

If you have opted to receive your refund by direct credit to your bank account, you would receive it directly into the bank account as long as the refund amount is up to Rs. 50,000.

In other cases, you would receive a ‘Refund Order’ which is similar to a cheque. To prevent misappropriation of your refund, your bank account number as mentioned in your tax return form is written over the refund order.

I am claiming a tax refund while filing my tax return. Is it something to cheer about?

Frankly, there is nothing to cheer about.

In most cases, tax refunds arise due to lack of tax planning or poor tax planning.

As mentioned earlier, tax refund is the refund of excess taxes, which you have already paid to the government. So the tax refund is like getting your own money back after a few months or sometimes after many months.

At times the refund gets stuck for some or the other reasons. Then you need to follow up for the refund with the tax department. Claiming very high amount of tax refund may also increase the chances of getting your return selected for scrutiny assessment.

Thus, claiming tax refund is no great news. You lose on ‘time value of money’ and at times have to go through the hassles of following up for refunds or at times face scrutiny assessment.

What can I do to avoid claiming tax refund? (From a salaried individual’s point of view)

Identify all the tax benefits, which you are entitled to. In most cases, such benefits would include house rent allowance exemption, LTA exemption, medical reimbursement exemption, tax benefits on housing loan, deduction on payment of registration fees and stamp duty for purchase of house, other tax saving investments (such as PF, PPF, ELSS, Life Insurance, children tuition fees etc.) deduction for handicapped dependants, deduction on payment of mediclaim insurance premium, deduction on payment of interest on education loan, etc.

File your tax declarations mentioning all the tax benefits you are entitled to, to claim with the Payroll department of your company soon after the start of the year.

If you do not file tax declaration the Payroll may deduct taxes as if you are not eligible to claim any tax benefits and this would then result into excess deduction of taxes.

Filing tax declaration ensures that Payroll would deduct taxes only after considering the tax benefits for which you have claimed in the tax declaration form.

Submit proofs for all the tax benefits claimed within the due date declared by your Payroll department. These proofs may include medical bills for claiming medical reimbursement exemption, rent receipts for claiming HRA exemption, LTA bills/tickets for claiming LTA exemption, receipts for tax saving investments, tax certificate issued by housing finance companies, etc.

If you happen to change your job in between the year make sure that you submit these proofs, especially rent receipts, LTA bills/tickets and medical bills, to the Payroll before leaving the company.

If you do not submit the proofs then the employer will deduct excess taxes, which you will have to claim as refund at the time of filing your tax returns.

We think that poor worry about money and rich don’t. But trust me, when it comes to taxes, we all worry about money. A study done by Business News Daily showed that financial fears take the top seat among reasons to worry. Tax season is on and people have either filed their tax return or planning to do the same. Dealing with tax creates a lot of stress in our mind but once we are done with it, we look for some payback and our weapon in this endeavor is Income Tax Return. Filing tax return may result in healthy tax refund. Tax refunds are excellent stressbusters. Everyone wants to get a juicy refund after filing taxes because who doesn’t want to be rolling in money.

However, not everyone is lucky enough to get a cheque from the tax department. If you are expecting a tax refund, you certainly don’t want to be at the bottom of the waiting list. You must be careful while filing return if you want deep pockets. If you paid more than your share to the taxman, then you deserve a refund. All you need to do is avoid some pitfalls to get your tax refund on time:

1)    Filling incorrect data in Income Tax Return:

Income Tax Return filing is a task that most of us do only once a year, so mistakes tend to happen in the process. If you made any mistake in filling your ITR form, you will not only find yourself doing the whole job again but will also get your refund late. Hence, it is advisable to use a professional service to get your tax return filed.

2)    Filing return late:

If you file your tax return early, you can expect to get it processed faster by Income Tax Department (ITD). As a result, you can get your tax refund early too. Most of us wait till the last moment to file our returns but we do not want to wait for refund. Filing your tax return late can put your refund on the backburner. So don’t wait for 31st of July and e-file your return on time if you haven’t filed yet.

3)    Using paper mode to file return:

E-filing has gained popularity among the masses as it is less tedious and consumes lesser time than filing on paper. E-filing service is provided by ITD as well as several private companies which can make your job easier. E-filed returns are easier for ITD to process and therefore they can give refunds quicker. It’s a good reason to e-file your tax return if you are still stuck with paper.

4)    Mismatch in TDS details:

Even if you filed your tax return correctly from your end, a lot of other factors can result in mismatch of TDS data when ITD processes your return. It is possible that your employer failed to furnish correct details of TDS deducted in your Form 16. Mistakes can also happen from tax department’s end which can result in mismatch of TDS data. Whatever may be the case, it can ultimately result in your refund being stuck with the taxman for a longer period of time.

5)    Late verification of ITR-V:

If you sent your ITR-V to CPC through speed post, it may reach its destination late or even fail to reach due to reasons not under your control. As a result, ITD will not be able to issue you a refund. Government has come up with a lot of methods which enable you to e-verify your return. E-verification can help in faster processing of tax returns.

The 27th GST Council meeting commenced on 4th May 2018. In the meeting, decisions were taken towards promoting digital transactions & GST rates on some goods. However, the main agenda of the meeting was the simplification of GST return filing process. Here are the key takeaways from the meeting.

1) Simplification of return filing process

The GST Council gave approval to a new simplified return filing process. The key points related to this new method are as follows:

  • Now all the taxpayers are required to file a single monthly return. The only exceptions are the composition dealers (who file a single return every quarter) and dealers filling NIL return.
  • A method will be developed which enables the buyer to see invoices uploaded by the supplier (in any time basis during the month) in real time basis.
  • The taxpayers will be able to get their tax liability and input tax credit automatically calculated based on invoices uploaded by B2B dealers. This will be facilitated through a user-friendly IT interface.
  • If the seller did not pay tax, the buyer would not lose the credit of ITC automatically. Default in payment will be recovered from the seller, and the authorities will have an option to reverse credit in exceptional situations, but automatic reversal will be disabled.
  • A robust, online and automated process will be created to reduce human interaction on the GST portal. Reversal of input tax credit and recovery of tax will be done by issuing notices through this automated process.
  • To prevent the misuse of input tax credit, suppliers will be stopped from uploading invoices if the default in the payment of tax exceeds a certain threshold.
  • This new simplified system of filing returns will be implemented in 3 stages. In the first stage, dealers will continue filling GSTR 3B and GSTR 1 for six months. In the next stage, the new return will have facility for invoice-wise data upload and facility for claiming ITC on self-declaration Dealers will be fed with the information on the gap between the credit available to them (add per the invoices uploaded by the seller in GSTR 1) and provisional credit claimed. This stage will also last for six months. In the last stage, the facility to claim provisional credit will be withdrawn, and the taxpayers will be able to claim the credit only based on invoices uploaded by the seller.

2) Promotion of digital transactions

GST council recommended to reduce the rate of tax (where the GST rate is 3% or more) applicable on B2C supplies where the payment is made through cheque or digital mode for a ceiling of Rs 100 per transaction.

3) Cess on sugar above 5% GST rate

Keeping in view the record production of sugar in the current season, the council discussed the possibility of levying a cess over and above the 5% GST and reduction of GST rate on ethanol. The council recommended setting up a GoM from state governments to look into this matter and make recommendations within two weeks.

4) Complete control over GSTN

In the meeting, the government also decided to bring GSTN completely under its control by buying 51% stake from the private entities.

5) GST on property transfer

A proposal was made to levy GST on the transfer of property.

6) Changes in ITC provisions

The council proposed amendment of ITC provisions so that businesses can claim credit on any business related expense.

7) Update on RCM

The council proposed preponement of reverse charge mechanism. In the initial phase, it will be applicable only to a particular category of taxpayers.

If you need any assistance in filing your monthly GST returns, our team of in-house experts can help you with it. Contact us and get all the help you need to comply with the GST laws.

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