Income tax refunds are only issued to bank accounts that have been pre-validated. Nevertheless, in some cases, such as when the bank account name does not match the PAN, the IFSC is invalid, or the bank account is closed, the refund may be delayed even if the income tax return has been successfully filed.
“Filing your Income Tax Return (ITR) is possible even if there’s a name mismatch between your PAN and bank account,” says CA Pranjal Bansal, Partner, A A P T & Associates, a Chartered Accountancy firm.
So, a situation could arise in which you successfully filed your ITR, but your tax refund is delayed due to a PAN name mismatch with your bank account.
Read More: ITR filing: Will tax department extend July 31 deadline amid e-filing glitches?
When are income tax refunds issued?
If your total tax liability is less than the tax already deposited with the government through TDS, advance tax, or other means, you might be eligible for an income tax refund of the excess amount of tax deposited.
“Income tax refund means a refund amount that is initiated by the income tax department if the amount paid in taxes exceeds the actual amount due (either by way of TDS or TCS or Advance Tax or Self-Assessment Tax),” as per the income tax department website as of July 12, 2024.
How PAN name issue can cause you to stop getting income tax refund though ITR is filed successfully
Refunds are issued only to pre-validated bank accounts through the Electronic Clearing Service (ECS), so the name in the bank account is verified with the name in PAN.
“It is important for Individual taxpayers to ensure that bank account details provided are valid, the correct PAN is linked to that account and the bank account is pre-validated at the income tax portal. In case name as per PAN records is not matching with bank records, the department will not issue a tax refund to that individual,” says Chartered Accountant Mihir Tanna, associate director-direct tax, S.K Patodia LLP.
Tanna further shares his experience with one of his clients. “In the case of one of our clients, a bank account was opened by submitting a copy of passport as proof of identity. However, the name as per PAN and as per bank records was different, so the Income tax department could not process refunds for FY 2022-23 (AY 2023-2024). Later, we had to apply for a change of name in PAN records by filing a correction form and once the name got changed in PAN records, we applied for reissue of refund from the income tax portal and then refund was credited in the given bank account,” he says.
The screenshot below shows what was the error that Tanna’s client was seeing on the e-filing ITR portal.
Source: Chartered Accountant Mihir Tanna, associate director-direct tax, S.K Patodia LLP
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According to chartered accountant Kanishka Chaudhary, Chief Financial Officer (CFO), Suryoday Small Finance Bank (SSFB), “To resolve the name mismatch issue, the individual should first update their bank account details to match the name on their PAN card. They can do this by providing a copy of their PAN card and other necessary identification documents to their bank. Once the bank updates the account information, it should align with the PAN card details, ensuring smooth processing of tax refunds.”
According to Bansal, the name mismatch between PAN and bank account can even arise due to the slightest variation in your name, whether it’s a missing initial or a different spelling, etc, all these aspects can trigger this error. “The tax department’s system sees it as a mismatch, flagging it and putting your refund on hold,” he says.
Hindu Undivided Families (HUF) need to be vigilant about the name appearing in their PAN and Bank account. “PAN of HUF have their name plus HUF printed on it. Same for bank account name also. The tax department will check each and every letter on both PAN and bank account, so the names must match including the HUF word,” says Tanna.
Will you get interest on a tax refund if it is held back due to name mismatch issue?
Under section 244A, we get interest on eligible tax refund amounts. This interest is paid at a 0.5% rate per month, which comes to 6% per annum.
According to Tanna, “There will be loss of interest on refund (if applicable) for the period in which refund cannot be credited due to name mismatch (as the reason for delay in issuing refund is not attributable to the income tax department).” For the period before the name mismatch issue popped up, interest on tax refund was given to Tanna’s client.
Read More: ITR Filing 2024: What is the penalty amount for filing income tax returns after the due date?
What are your options if name mismatch problem exists in your case
There are only two options if your tax refund has been stopped due to a name mismatch between PAN and bank account. You can either make the name correction in your PAN or make it in your bank account.
“We advise our clients to change the name in such a document, which can be done very easily and in minimal time. For example, if there are four documents- passport, PAN, Aadhaar and bank account statement and the name in bank account is not matching with PAN, Aadhaar and passport then we advise to change the name in bank account. Passport is the last document we recommend for name change purposes, as it is very difficult to do so,” says Tanna.
As per Bansal, one of his clients faced a similar name mismatch issue between PAN and bank account.
“I had a similar issue, and correcting it was straightforward. You need to fill out a PAN correction form and provide the necessary documents. Alternatively, you can update your bank account name to match your PAN. This might be a quicker fix than trying to fix PAN. In the case of our client, we changed the name in the bank account,” says Bansal.
