What are the strategies to maximize tax refunds after submitting an income tax return (ITR)? (2024)

Dr. Suresh Surana, Founder, RSM India

Income tax refund usually arises when taxes paid are greater than the actual tax assessed. In order to maximise tax refunds, the taxpayers may opt for the following:

(i)Claim all the available Deductions/ Exemptions

Every taxpayer should make an effort to claim all the eligible deductions and exemption at the time of furnishing their tax returns so as to enable them to reduce their tax liability to minimum and accordingly maximise their tax refunds, if any.

(ii) Reconcile all the differences in TDS/ TCS with Form 26AS/ Annual Information Summary (AIS)/ Tax Information Summary (TIS)

One of the main reasons for issuance of refunds is excess tax paid on account of TDS and TCS. Thus, any discrepancy in the amounts of TDS and TCS as per the revenue authorities records and the taxpayer’s records may result in lower refunds to the taxpayer. Thus, taxpayers need to reconcile any difference in the TDS/ TCS as per their tax records and as per Form 26AS/ AIS/ TIS.

(iii) Revalidate the Bank account details

The taxpayers should ensure that the bank details (such as account no., IFSC Code, etc.) are correctly provided at the time of furnishing the tax return. Thus, the bank details should be properly validated by the taxpayer.

(iv) Duly E-verify the tax return

Any tax return which is not e-verified would be considered as a defective return and no refund would be furnished in such case. Thus, every tax return should be duly e-verified within 30 days from the date of furnishing the return.

(v) Check for any adjustment of refund for the year against any outstanding demand for any previous financial year/s

At times, the revenue authorities may adjust the refund for the current year against previous year’s outstanding demand. Thus, the taxpayer must keep a track of any Intimations issued u/s 245 of the Income Tax Act, 1961 (hereinafter referred to as ‘the IT Act’) for intimation of any such refund adjustment.

Sujit Bangar, Founder, Taxbuddy.com

1. File income tax returns on time to avoid late filing fees which will reduce your refund amount or can add an additional tax liability.

2. Before filing your tax returns, make sure to verify your personal and income details with 26AS & AIS/TIS. Check if all the TDS are reflected in 26AS so that full TDS can be claimed or adjusted against the tax liability and flag any incorrect information or income added to your PAN on AIS/TIS.

3. You have the option to switch your tax regime at the time of filing your returns. If you realize that you have chosen the wrong regime earlier, it is advisable to switch to the correct regime before filing your returns. This can help you pay lesser taxes or even claim a refund if excess taxes were deducted from your income.

4. When calculating your final taxes, it is important to include the advance tax you have paid. This will help in adjusting any additional taxes that may be due, which can be adjusted with the advance tax payments you have already made. So, remember to mention the advance tax payments while calculating your final taxes.

5. You can claim tax deductions on medical expenses incurred by you or your family during the financial year. Keep all medical receipts and bills as proof.

6. Claim tax deductions for medical expenses with proper receipts and bills.

7. To avail HRA exemption, provide the required documents like rent receipts if you are a salaried individual residing in a rented house.

8. You can claim tax deductions for the interest paid on an education loan taken for yourself, your spouse, or children.

9. Donations to recognized charitable organizations allow you to claim tax deductions. Under section 80G of the Income Tax Act, you can claim deductions up to 50% of the donated amount.

10. If you have a health insurance policy, you can claim a deduction of up to INR 25,000 for the premiums paid. For senior citizens, the amount can be increased to INR 50,000.

11. Please ensure bank details are filed correctly. Mostly this is the reason for delayed refund.

Suman Bannerjee, CIO, Hedonova

Claim all eligible deductions: Ensure that you have claimed all applicable deductions, such as Section 80C deductions (EPF/VPF, PPF, life insurance premium, etc.), Section 80D deductions (health insurance premium), and other deductions available under the Income Tax Act.

Submit accurate documentation: Make sure you have the necessary documents and proofs to support your claims for deductions or exemptions. Maintain proper records of your income, expenses, investments, and other relevant financial transactions.

Review your tax-saving investments: Assess your tax-saving investments and make any necessary adjustments before the end of the financial year. This includes maximizing contributions to EPF/VPF, PPF, National Pension Scheme (NPS), and other eligible schemes.

Utilize exemptions and allowances: Familiarize yourself with the exemptions and allowances available to you, such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), and medical reimbursem*nts. Ensure you have properly claimed these benefits.

Capitalize on eligible tax credits: Check if you are eligible for any tax credits, such as the TDS (Tax Deducted at Source) credit or foreign tax credits, if applicable. Verify that these credits are correctly reflected in your tax return.

Consult a tax professional: If you have complex financial situations or are unsure about optimizing your tax refunds, consider consulting a tax professional who can provide personalized advice based on your circ*mstances.

Saakar Yadav, Director & Founder, MyITreturn.com

Invest in tax-saving instruments such as Employee Provident Fund (EPF), Public Provident Fund (PPF), National Savings Certificate (NSC), Tax-saving FDs,(ELSS). Life Insurance etc. These investments can help reduce your taxable income.

● Claim all eligible deductions and exemptions: Ensure that you have claimed all the deductions and exemptions available to you under the Income tax laws. This includes deductions for expenses such as medical bills, education loans interest, house rent, home loan interest, and investments in tax-saving instruments like ELSS (Equity Linked Saving Scheme), insurance premiums, etc.

● Review your tax filing status to ensure you have chosen the most beneficial option. For example, if you have multiple tax saving investments (such as EPF, PPF, NSC etc), file under the old tax regime, otherwise opt for a new tax regime.

● Make sure to claim all the tax credits available to you as tax credits directly reduce your tax liability. Always reconcile your return with Form 26AS and take credit for tax paid reflecting in 26AS.

● If you are uncertain about the tax laws or want to optimize your tax refunds, consider consulting a tax professional or some assisted services.

Note: If you have filed your tax return but missed to claim some deductions, tax credits you can file a revised return within the prescribed time to take benefits of things you missed while filing your original return.

Anita Basrur – Partner, Direct Tax – Sudit K Parekh & Co. LLP

Once a return is filed and there is a refund claimed in the said return, then following steps may be taken for speedy issuance of the income tax refund.

A) Providing correct banking information - The taxpayer should ensure that correct bank information is provided in the income tax return filed by him. This information includes bank name, bank account number and IFSC code. Incorrect bank account details may lead to failure and unnecessary delay in issuance of refund by the tax department.

B) Pre-validate bank account - Refund will be issued to the pre-validated bank account only. Further multiple bank accounts can be pre-validated as well as nominated for issuance of income tax refunds. Pre-validation of the bank account can be done by logging on the income tax portal and clicking on My profile. Under my profile tab, there is an option to add the bank account. The only condition is that the bank account must be linked with the PAN and user needs to have IFSC and account number for pre-validating the bank account. Pre-validation status is generally updated on the income tax portal within 10-12 working days.

C) Refund Re-issue request - If the refund issuance has failed due to incorrect bank account or validation not being done, then a request can also be placed for re-issuance of refund. The said request can be placed on the income tax portal by logging into the tax payer's account. The taxpayer has to click on 'My Account' menu and click 'Service Request' link. Then the taxpayer has to select the 'Request Type' as 'New Request' and then select the 'Request Category' as 'Refund Reissue'.

D) Application to the Jurisdictional Assessing Officer (JAO) - In case for some technical reasons, the refund is not processed electronically, then the taxpayer can write a letter to its JAO explaining the facts of the same and submitting the documents (like tax return, Form 26AS, challans for various taxes paid in that year), post which the JAO can issue such refunds. However the same is possible only if the rights for that particular assessment year is transferred from CPC to JAO.

In case the JAO doesn't have the rights to issue such refund, then he can place a request from his own system to CPC to expedite the refund issuance process.

CA Manish Mishra, Virtual CFO

Claim all eligible deductions: Take advantage of all applicable deductions available under the Income Tax Act. Deductions for expenses like home loan interest, medical insurance premiums, tuition fees, and charitable donations can significantly reduce your taxable income. Keep detailed records and gather supporting documents for your claims.

Utilize tax-saving investments: Invest in tax-saving instruments such as Public Provident Fund (PPF), National Savings Certificate (NSC), Tax-saving Fixed Deposits (FD), and Equity Linked Savings Schemes (ELSS). These investments not only offer tax benefits but also provide returns. Consider the lock-in periods and risk profiles of different investment options before making your decision.

Optimize salary structure: Arrange your salary components such as allowances, reimbursem*nts, and perquisites in a manner that maximizes tax benefits. For example, you can claim exemptions for House Rent Allowance (HRA), conveyance allowance, and medical reimbursem*nts. Consult with your employer or a tax advisor to explore the best salary structure for your specific circ*mstances.

Check Form 26AS: Form 26AS is a consolidated tax statement that reflects the tax credits available against your PAN (Permanent Account Number). It provides details of tax deducted at source (TDS) from your income, including salary, interest, rent, etc. Verify that the TDS mentioned in Form 26AS matches your actual income. Any discrepancies should be resolved with the deductor or the income tax department.

Utilize deductions for specific expenses: Take advantage of deductions available for specific expenses, such as medical treatment for specified illnesses, which can be claimed under Section 80DDB. Ensure you have the necessary supporting documents, such as medical bills and prescriptions, to claim these deductions accurately.

Check AIS (Annual Information Statement): The AIS provides a comprehensive view of your financial transactions and helps you cross-verify the details furnished in your tax return. Verify if the income, TDS, and other financial details mentioned in the AIS align with your records. Rectify any discrepancies to avoid potential penalties or delays in receiving your tax refunds.

File tax returns on time: Filing your tax returns and verify with Aadhaar OTP or other mode within the specified timelines is crucial to receive any eligible tax refunds promptly. Late filing can lead to penalties and interest charges. Be diligent in meeting the deadlines set by the income tax department to ensure a smooth refund process.

Maintain proper documentation: Maintain accurate records of all financial transactions, including income, expenses, investments, and deductions. This documentation will help you validate your claims during tax assessment and maximize your tax refunds. Keep all relevant documents, such as Form 16A & Form 16, investment proofs, rent receipts, and medical bills, organized and readily accessible.

Seek professional advice: If you find tax matters complex or need assistance with optimising your tax refunds, consider consulting a professional tax advisor. They can provide personalized advice based on your unique circ*mstances, guide you through the process, and help identify additional opportunities for tax savings.

Remember, while maximizing tax refunds is important, it is equally essential to file accurate and truthful returns. Avoid any fraudulent practices or misrepresentation of information, as it can lead to severe consequences. Stay compliant with tax regulations and seek professional guidance when needed.

The above advise on the assumption that the person is filling the ITR by adopting old tax regime by claiming deductions.

Ashish Misra, chief operating officer - retail banking at Fincare SFB

To maximize your tax refund after submitting your income tax return, a few factors come into play and one can benefit from being methodical about these. These include, ensuring that all available deductions have been utilized, check and eliminate even minor errors in computation, ensure to file returns within the timelines, do invest in tax-saving schemes available, claim eligible exemptions such as HRA, consider re-investing the refund in tax-saving or long-term investments.

Nishant Kohli, Founder and Director, Mudra Portfolio Managers

Even while everyone is happy to receive a tax refund, receiving a refund indicates that your tax strategy was poor because it means you had to pay more TDS the previous year and that your net cash inflow during the previous year might have been higher.

Therefore, the emphasis should be on making sure that tax planning is done at the start of the year and then is reviewed regularly, as this should lead to a minimum tax payment and a consequent reduction in TDS deduction.

For example, people know and keep a tab on 80 C deduction but are unaware and miss out on other deductions available like 80D Deductions for Medical & Health Insurance. Tax planning will also help you to ensure that you do not end up paying penalty and interest in case of Tax liability.

Avinash Shekhar, Founder &CEO, TaxNodes

As tax season concludes and individuals eagerly await their refunds, I want to emphasize the importance of maximizing these returns and filing income tax returns in a timely manner. By employing a few strategic steps and staying compliant with the law, you can make the most of your tax refund while fulfilling your tax obligations.

Firstly, filing your income tax returns promptly is crucial, instead of waiting for the last day. Not only does it help you avoid penalties and late fees, but it also ensures that you receive your tax refund sooner. As the landscape of taxation is rapidly evolving, a separate schedule was proposed for Virtual digital assets in the 2022 union budget.

As per the new norms, any income from the transfer of any virtual digital asset is taxed at the rate of 30 per cent. Further, there will be a 1 per cent tax deducted at source (TDS) on any payment made in relation to the transfer of virtual digital assets. It was also proposed that the gifting of virtual digital assets would be taxed in the hands of the recipients. Since the nature of crypto taxation is complex, it's essential to file your crypto taxes accurately and in a timely manner.

The Indian tax authorities are increasingly focusing on crypto transactions, and failing to report them can lead to potential penalties and legal consequences. By promptly fulfilling your tax obligations related to cryptocurrencies, you can stay compliant with the law and maintain peace of mind. Additionally, when it comes to maximizing your tax refund, it's crucial to consider deductions, exemptions, and tax credits.

Thoroughly reviewing the tax laws and identifying eligible deductions and exemptions can reduce your taxable income, potentially resulting in a higher refund amount. It's advisable to consult the income tax guidelines or seek professional advice from platforms like TaxNodes to understand the specific rules and thresholds related to gifts and taxation.

By staying informed, proactive, and compliant with tax regulations, you can maximize your tax benefits, minimize your tax liability, and pave the way for a strong financial future.

Karan Aggarwal, Chief Investment Officer, Elever

1. Investments of up to INR 50,000 in the NPS scheme are exempted from tax. This exemption is over-and-above 80C limits of INR 1.5 Lakhs.

2. Home ownership can significantly reduce tax outflow with interest up to INR 2,00,000 per annum on a home loan is exempted from tax. In the case of a working couple and joint ownership, both individuals can avail of benefits provided the total exempted amount is not more than the total interest paid over the year.

3. In the case of mutual funds and stock market investments, you can sell loss-making investments on the last day of the financial year to offset capital gains and get a refund on the capital gains paid during the year. Losses can be used for the next 8 years to offset capital gains.

4. If both individuals are working and the health insurance premium for the family goes above INR 25000, two separate policies can be taken. It has the potential to double the health insurance rebate for the household.

5. Any contributions to PPF must be made before 5th of the month to ensure that new interest is calculated on the higher corpus.

6. Any investments to be done for the girl child must be done through the SSY scheme. SSY scheme usually provides the highest interest among government schemes (with the exception of PF). It is the only safe fixed-return scheme outside senior citizen schemes and Provident fund structures that enjoy Exempt-Exempt-Exempt status.

CEO of Prayatna Microfinance, Somya Srivastava

Although submitting your income tax return might be challenging, there is no denying the relief that comes after filing it. Despite the fact that every person's tax situation is different, there are a few common tactics you may take into account to increase your tax refunds possibly. Let's look at a few of these that might help you save more money.

Review Your Filing Status: Consider your alternatives for filing status, such as filing jointly or individually, to locate the biggest tax savings and secure the best return.

Maximize Deductions: To lower taxable income, search for qualified premises, and gather receipts and other supporting documentation to support deductions, utilize deductions.

Leverage Tax Credits: It's crucial to comprehend the rules and apply for all the tax credits you qualify for because they're a great strategy to lower your tax responsibilities. There are certain requirements for each credit.

Explore Retirement Contributions: Increase contributions to tax-advantaged retirement plans to reduce taxable income and increase your refund.

Capitalize on Flexible Spending Accounts (FSAs): By allocating pre-tax funds for healthcare or childcare expenses, FSAs can decrease taxable income and improve the likelihood of getting a larger return.

Stay Informed about Tax Law Changes: It is important to stay up-to-date with tax regulations to maximize deductions and credits and consult with a tax expert for advice tailored to your situation.

Seek Professional Advice: Using a skilled tax professional's service can help maximize tax refunds by managing the complexities of the tax system and offering personalized guidance.

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Published: 14 May 2023, 04:30 PM IST