TIME LIMIT FOR PROCESSING OF INCOME TAX RETURN

Income tax return filed is processed by the CPC – Central Processing Unit. Presently, CPC Bangalore is responsible for carrying out all primary assessments.

The CPC unit of Income tax department takes up the ITR for processing  i,e cross checks the details reported in the ITR with the information in hand and sends a notice of intimation under section 143(1) to the registered email address. The Income Tax Department processes the income tax return only after they are filed and successfully verified by the taxpayer.

Sending intimation under section 143(1) Before expiry of 1 year from end of financial year in which return is made

Budget 2021 has proposed to reduce the time allowed to the income tax department to process income tax returns (ITR) by three months. As per the budget proposals, the time limit for sending intimation notice under section 143(1) of the Income-tax Act, 1961 is proposed to be reduced from one year to nine months from the end of the financial year in which the return was filed.

This notice is normally sent to confirm to the tax payer that his/her return has been processed. The notice states if there is any tax demand from the tax payer or any refund due to him/her. If any refund is due it will be issued only if it is reflected in the notice. Therefore, an early receipt of intimation under section 143(1) showing a refund means that the process of issue of your tax refund has started.

As per the proposals of today's budget, now income tax department is required to send Intimation u/s 143(1) within 9 months from the end of the financial year in which return is furnished. Earlier it was one year, hence the time limit of sending intimation has been reduced which will help in faster processing of the ITRs and the department will issue quick refunds.”

Interest on Refund of Income Tax

If the assessee is entitled to the receipt of refunds of any account under the Income Tax Act, he would be the beneficiary of refunds, along with the simple interest as calculated in the manner as discussed later on in this article.

Excess Payment of Advance Tax, Tax Deducted/Collected at Source

Where the refund arises out of any tax which is being collected at source under Section 206C or being paid by means of advance tax, or where the credit is being taken for tax deduction (TDS) as described in Section 199, pertaining to the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of 0.5% for each of the months or part of each month comprised in any of the following period:

• From the 1st of April of the particular assessment year until the date of grant of refund, provided that the return of income has been furnished on or before the due date specified under Section 139(1).
• From the date of furnishing of return of income until the date of grant of refund, excluding the above scenario.

Excess Self Assessment Tax Paid

In the given scenario, interest shall be calculated at the rate of 0.5% for every month or part of the month, for the period ranging between the date of furnishing or payment of tax, until the date on which the refund is granted.

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