Sometimes, people end up paying more tax than they’re required to pay. For example, if TDS or advanced tax is more than the tax a person is due for, then that person can claim an income tax refund. An ITR refund is a way to ensure that you get back any extra tax that you’ve paid. Now you know what is a tax refund.
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Income Tax Refund CalculationWhen you’re filing your ITR, you can calculate your income tax refund after taking all exemptions and deductions into consideration.
Total Tax Paid for the Year – Total Tax Payable for the Year = Income Tax Refund
The total tax paid for the year will include any self-assessment tax, TCS (tax collected at source), advance taxes, and TDS. If this exceeds your actual tax liability, you can claim an ITR refund.
Income tax refund meaning with the help of an example:
| Particulars | Amount |
Taxable income (A) |
₹ 500000 |
Gross tax liability on above (B) |
₹ 12875 |
Minus: Foreign tax credit (if applicable) |
₹ 1000 |
Net tax liability |
₹ 11875 |
Plus: Interest on tax liability (Sections 234C, 234B, and 234A) |
NIL |
Total tax liability |
₹ 11875 |
Minus: Taxes paid (C) |
₹ 25000 |
Tax Refund |
₹ 13125 |
As you can see, when B < C, you’ll be eligible for an income tax refund.
If C < B, then you’ll be required to pay income tax instead of your tax liability.
Read more:
Is income tax refund taxable?
Is interest from income tax refund taxable?
How to claim income tax refund of deceased assessee?
I hope now you have a complete understanding of what is a tax refund.
Authors Of The Question
What is a tax refund?
Yogi
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2022-09-05T13:27:09+00:00 2022-09-14T17:00:03+00:00Comment
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