Tax refund is the amount the Income Tax Department repays to you when the total tax paid by you—through TDS, advance tax or self-assessment tax—exceeds your tax liability for the financial year. To claim this refund, you should file your income tax return (ITR) correctly and within time. The refund will be credited directly into your bank account after the tax department processes your return.
Make the most of Section 80C
Section 80C lets you take deductions of up to ₹1.5 lakh on different expenses and investments. They include public provident fund (PPF), employee provident fund (EPF), equity-linked savings schemes (ELSS), life insurance premium, principal repayment for home loans, tuition fees of children, and National Savings Certificates. To reap maximum refund, make sure you have taken the maximum limit of ₹1.5 lakh under this section. Maximum salaried individuals miss out on this simply because they don't maintain a record of their qualifying investment or expenditure during the year.
Don't overlook other deduction options
Besides 80C, there are some other deductions which can reduce your taxable income by a significant amount. Section 80D offers deductions for health insurance premium paid on yourself, your dependents and your parents. Section 24(b) provides tax relief on interest paid on home loans, up to ₹2 lakh per year. If you’ve taken an education loan, the interest can be claimed under Section 80E. Contributions to the National Pension System (NPS) qualify for an additional deduction of ₹50,000 under Section 80CCD(1B), over and above the 80C limit. Donations made to eligible charitable trusts can also be claimed under Section 80G, if you possess receipts and PAN information of the beneficiary organisation.
Align your records with Form 26AS and AIS
Check Form 26AS and the Annual Information Statement (AIS) on the income tax portal before you file your return. These reports indicate the tax withheld at source by your employer, bank, or other deductors and high-value transaction details. If there is a mismatch between your income and the one indicated in these forms, your refund will be delayed. For example, if a bank withheld TDS on fixed deposit interest but did not report it, the department may not give full refund until the discrepancy is settled.
Declare interest income and other overlooked earnings
Wording: Most taxpayers miss disclosure of interest earned from savings account, fixed deposit or recurring deposits. Not only does this create compliance issues but also lowers refund. While interest from a savings account up to ₹10,000 is exempt under Section 80TTA, it has to be disclosed. Similarly, any rent, dividend income or side revenues must be disclosed and taxed accordingly. Disclosure of these will entitle you to credit for tax already paid in the form of TDS or advance tax.
Account for capital gains and claim exemptions where necessary
If you've disposed of property, shares, mutual funds or other goods, gains resulting from this need to be accounted for in your return. You can, however, reduce your tax burden by claiming
relief under relevant sections. For example, investing gains from the sale of a house in a new house can reduce your capital gains tax under Section 54. Purchase of capital gains bonds within six months can give relief under Section 54EC. In case you have incurred capital losses, you can set them off with gains to reduce your tax base and enhance your refund.
Use Form 10E for salary arrears
If you have received arrears of salary in the financial year, it may have pushed your earnings into a higher tax slab. To avoid paying more tax than needed, you can claim relief under Section 89(1) by submitting Form 10E before you submit your ITR. This allows you to split the tax burden over financial years and usually results in a greater refund.
Choose correct ITR form and regime
It is essential to file your return on the correct ITR form and choose the proper tax regime. For example, salaried taxpayers without business income or capital gains can submit ITR-1. Choosing the old tax regime allows you to claim several allowances, whereas the new regime offers lower tax rates but fewer allowances. If what you want is to maximize your refund and you qualify for eligible deductions, the old regime would be better for you. Most taxpayers lose higher refunds just because they fill out the wrong regime or form. File early and do not forget to verify
Early submission of your return prior to the deadline allows for faster processing and quicker refunds. But filing alone is insufficient—you must e-verify your return within 30 days via options such as Aadhaar OTP, net banking or by sending a signed copy to the Centralised Processing Centre in Bengaluru. A non-verified return is not valid and no refund is given.
The takeaway
Maximizing refund is not a question of preparation of a complicated return—it's a question of proper planning, proper documentation, and timely action. With the use of all available deductions, proper reporting of income, and the correct options being exercised, you can achieve the fact that every rupee you're entitled to receive back to you.
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