When you file your Income Tax Return (ITR) and claim a refund, the final value may be lower after the Income Tax Department processes your request. This is because the refund amount shown on the portal is only an estimate. This estimate is usually shown based on the tax paid and deductions claimed by you.
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Once an ITR is submitted, the return is checked by the Centralised Processing Centre (CPC) under Section 143(1) of the Income-tax Act. The department compares the details in your ITR with its records. These include Form 26AS, the Annual Information Statement (AIS), the Taxpayer Information Summary (TIS) and tax payment records.
It also verifies whether the Tax Deducted at Source (TDS) claimed by you matches the TDS reported by employers, banks and other deductors.
If the department finds any mismatch or error in your ITR, it can make adjustments, which can result in lower tax refund for you. These adjustments could include correcting calculation mistakes, removing incorrect claims and revising tax credits that do not match official records.
Possible Mistakes For Lower Refund
According to the ClearTax website, a common reason for a lower refund is a mismatch in tax credits. If the TDS claimed in the return is higher than the credit shown in Form 26AS, the excess amount may be rejected. Refunds may also be reduced if the income is reported incorrectly or if there is an old tax demand, which can be adjusted by the officials.
What Can Taxpayers Do?
As a result, taxpayers are advised to reconcile their income with the details available in the AIS and TIS to minimise such discrepancies. If taxpayers believe the refund has been reduced because of an apparent error, they should first verify the details in the Section 143(1) intimation. This intimation is issued by the department on their taxpayer’s email address, detailing the comparison of income, deductions etc reported by the user and evaluated by the department.
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If taxpayers are still not satisfied, they can file a rectification request through the Income Tax Department’s e-filing portal. If the refund is adjusted against an old tax demand, they can also respond to the demand through the portal.
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