Finance

Published: June 12, 2023
Updated: June 12, 2023

Understanding Tax Refunds: Deadlines, Processing, and Exemptions

Tax refunds are an essential aspect of income tax filing, providing relief to taxpayers by returning excess taxes paid. However, understanding the deadlines for receiving tax refunds and the eligibility for exemptions is crucial. This article aims to clarify the timeline for tax refund processing, steps to check the refund status, and the implications of transferring funds to a spouse's bank account for tax exemption purposes.

Tax Refund Processing and Deadlines:

According to the provisions of the Income-tax Act, filed income tax returns are electronically verified and processed by the income-tax authorities. The processing typically takes place within nine months from the end of the financial year (FY) in which the return is furnished. For FY 2021-22, assuming the return is filed during FY 2022-23, the taxpayer should generally receive an intimation under section 143(1) by 31 December 2023.

Checking Refund Status and Intimation:

Taxpayers can check the processing status of their tax return through their income-tax e- filing account. Once the return is processed, the taxpayer can review the intimation under section 143(1) to verify if the refund claim has been accepted or if any discrepancies exist in the filed return. If the refund is determined, it can be expected to be received in due course, unless adjustments with outstanding demands or technical issues arise.

Factors Delaying Refunds:

In some cases, tax refunds may be withheld for specific conditions determined by the tax department. These conditions could include outstanding demands or technical issues like non-linking of bank accounts or refund credit failures. In such instances, taxpayers are advised to take suitable corrective actions, such as filing an online grievance, to resolve the situation and expedite the refund process.

Transferring Funds for Tax Exemption:

Transferring funds to a spouse's bank account does not qualify for tax exemption under the provisions of the Income-tax Act. As per section 56, any sum of money received by an individual exceeding ₹50,000 is taxable under the head of 'Income from Other Sources'. However, if the gift is received from a specified relative, including the spouse, it is fully exempt from taxation in the hands of the recipient individual.

Clubbing of Income and Tax Implications:

Under section 64 of the Income-tax Act, any income earned by the spouse from assets transferred without adequate consideration is clubbed and taxed in the hands of the transferor. Thus, if you transfer money to your wife's bank account as a gift, any income generated from those funds will be clubbed with your income and taxable in your hands.

Understanding the deadlines and processing of tax refunds is essential for taxpayers. Regularly checking the status of the tax return processing and intimation can provide valuable insights into refund claims. It is important to note that transferring funds to a spouse's account does not qualify for tax exemption, and any income generated from those funds will be clubbed with the transferor's income. By being aware of these aspects and fulfilling tax obligations responsibly, taxpayers can ensure a smooth filing process and avoid any potential issues.