Income tax refund: how it works
Updated 11 October 2026
An income tax refund is the money the government pays back when the tax already paid in your name (TDS, TCS, advance tax or self-assessment tax) is more than the tax you actually owe for the year. You claim it simply by filing your income tax return and e-verifying it. The refund is credited to a pre-validated bank account, usually within a few weeks of processing, and if it is delayed the department pays interest of 0.5% a month.
Why you might be due a refund
- You declared investments or rent to your employer late, so more TDS was cut than needed.
- Your bank deducted 10% TDS on interest, but your total income is below the taxable limit or covered by the rebate.
- You paid TCS on a foreign remittance, a tour package or a car.
- You paid more advance tax than needed.
How to claim a refund
- Check credits in Form 26AS and AIS so that all TDS and TCS appear against your PAN.
- Pre-validate your bank account on the e-filing portal (profile, bank account). The account must be in your name and linked to your PAN. Refunds go only to a validated account.
- File your return before the due date, with all income and deductions. The refund amount is calculated in the return. See how to file ITR.
- E-verify within 30 days, with Aadhaar OTP or net banking. A return that is not verified is not processed.
Worked example
She filed on time, so interest runs from 1 April after the year ended. If the refund is issued in October, that is 7 months (April to October; part of a month counts as a full month). Interest = ₹23,000 × 0.5% × 7 = ₹805, paid along with the refund. The ₹805 is taxable income for the year she receives it.
Interest is paid only if the refund is at least 10% of the tax determined. If you file late, interest runs from the date of filing, not from 1 April.
How to check refund status
- On the e-filing portal: log in and open your filed returns. The status shows stages such as "Successfully e-verified", "Processed with refund due", and "Refund issued", along with any intimation.
- Intimation: after processing you get an intimation by email and SMS (the 143(1) intimation under the old Act). Compare the department's figures with yours. If they match, the refund is on its way.
- Refund banker status: once the department hands the refund to its refund banker (State Bank of India), the status of the payment can also be tracked through the portal.
Why refunds get stuck, and what to do
| Problem | Fix |
|---|---|
| Return not e-verified | Verify it; if 30 days have passed, verify with a condonation request |
| Bank account not validated, closed, or name mismatch | Validate the correct account and raise a "refund reissue" request on the portal |
| PAN inoperative (not linked to Aadhaar) | Link PAN and Aadhaar; see how to link |
| TDS mismatch (credit in return not in 26AS) | Ask the deductor to correct its TDS return, then request rectification |
| Refund adjusted against an old demand | Respond to the adjustment notice on the portal: agree, disagree or say the demand is already paid |
| Return picked for review or notice issued | Reply to the notice through the portal with documents |
The department can adjust your refund against an outstanding tax demand from an earlier year, but it must tell you first and give you a chance to respond. Check the "Pending actions" section on the portal regularly.
Avoiding refunds in the first place
A refund is your own money that sat with the government. To avoid large refunds, give your employer your regime choice, investment proofs and rent details on time; submit Form 121 (which replaced Forms 15G and 15H from 1 April 2026) to the bank if your total income is below the taxable limit; and tell your employer about TCS paid so it can reduce salary TDS. Use the income tax calculator early in the year to estimate your tax.
Official help on refunds is available on the income tax e-filing portal.