Refund of Tax refers to the amount returned by the Income Tax Department to a taxpayer when they have paid more tax than their actual tax liability for a financial year. This excess can arise from advance tax payments, self-assessment tax, or TDS (Tax Deducted at Source) that exceeds the final tax payable after filing the income tax return (ITR).
In the Indian context, tax refunds are processed under Section 237 to 245 of the Income Tax Act, but for most individuals and businesses, it simply means getting back the excess tax paid. Once the ITR is filed and verified, the Income Tax Department calculates whether a refund is due and credits the amount directly to the taxpayer’s bank account, provided the account is pre-validated.
For small business owners and first-time entrepreneurs, ensuring proper documentation and timely ITR filing is crucial to avoid refund delays. Refund status can be tracked online via the Income Tax portal. Delayed refunds may also accrue interest under Section 244A, which is an added benefit for compliant taxpayers.
Proper tax planning, accurate return filing, and reconciliation of TDS are key to ensuring a smooth refund process. Businesses often rely on professionals or platforms like FinTax24 to manage their income tax filings and maximise eligible refunds efficiently.
In practice, a refund not only indicates good tax discipline but also helps maintain cash flow, especially for startups and growing enterprises.