Income Tax Refund on Excess Tax Paid: Complete Guide to Sections 237–245 of the Income Tax Act, 1961

When an assessee discharges a tax liability exceeding what is actually due, the Income Tax Act, 1961 provides a structured mechanism for recovering the surplus. The framework governing such recoveries is embedded in Sections 237 to 245, as amended by the Finance Act, 2026. This guide walks through every critical dimension of the refund regime — from eligibility and filing requirements to interest entitlements and the authority's power to withhold or adjust refunds.

When Does a Refund Become Due?

The Foundational Rule Under Section 237

Section 237 of the Income Tax Act, 1961 establishes the bedrock principle: if an assessee demonstrates to the Assessing Officer that the aggregate tax paid — whether by the assessee directly or on the assessee's behalf, or amounts treated as paid for a given year — exceeds the actual tax payable, a refund of the excess becomes due.

The tax payment giving rise to a refund may take any of the following forms:

• Advance tax deposited during the financial year
• Tax Deducted at Source (TDS) or Tax Collected at Source (TCS)
• Self-assessment tax paid before filing the return
• Tax paid on regular assessment following an Assessing Officer's order

Key Point: It is not necessary for all four modes of payment to be present simultaneously. Even excess payment through a single mode — say, TDS — is sufficient to trigger a valid refund claim.

Who Is Eligible to Claim a Refund?

General Rule

Under the ordinary course of proceedings, the assessee who has borne the tax burden is entitled to reclaim the excess. However, certain situations require a different person to step into that role.

Special Cases Under Section 238

Section 238 of the Income Tax Act, 1961 identifies specific circumstances where a person other than the original payer is empowered to claim the refund:

1. Clubbing of Income: Where the income of one individual is included in the total income of another person by virtue of any clubbing provision under the Act (for instance, the income of a minor child being clubbed with the income of a parent), it is the parent or the person in whose hands income is clubbed who holds the right to claim the refund attributable to such income.

2. Incapacity of the Original Assessee: Where an assessee is rendered unable to claim or receive a refund due to death, incapacity, insolvency, liquidation, or any analogous cause, the right vests in:

   • The legal representative
   • The trustee
   • The guardian
   • The receiver, as applicable

   Such persons may claim or receive the refund for the benefit of the original assessee or their estate.

How to File a Refund Claim?

Filing Through Return of Income

With effect from 01-09-2019, following the amendment introduced by the Finance (No. 2) Act, 2019, refund claims can no longer be submitted independently through Form No. 30 alone. The refund must now be claimed exclusively through the filing of a return of income within the time prescribed under Section 139 of the Income Tax Act, 1961.

This integration ensures that refund claims are processed within the formal assessment mechanism rather than as standalone applications.

Condonation of Delay: CBDT Circular No. 11/2024

Overview and Supersession

CBDT Circular No. 11/2024 [F. No. 312/63/2023-OT], dated 1-10-2024, issued by the Central Board of Direct Taxes (CBDT), provides a comprehensive framework for handling applications seeking condonation of delay in:

• Filing returns claiming a refund
• Filing returns claiming carry forward of losses and their set-off

This Circular supersedes all prior Instructions, Circulars, and Guidelines issued by the CBDT on these matters.

Monetary Limits and Competent Authorities

The Circular designates specific authorities based on the quantum of the claim:

Time Limits for Condonation Applications