Quick Answer: Income tax refund examples help beginners see how TDS, the 87A rebate, deductions and cess combine into a final refund. This guide walks through four simple Indian cases for AY 2026-27: a fresher, a Rs. 12.75 lakh salary, a senior citizen with FD interest and an old regime investor.
Key takeaways:
- Even a tiny TDS amount can come back as a refund if you file your ITR.
- New regime taxable income up to Rs. 12 lakh pays nil tax after the 87A rebate.
- Senior citizens have higher exemption limits and can claim 80TTB in the old regime.
- Always compare TDS in Form 26AS with the tax calculated on your return.
- Refunds are credited with 0.5% monthly interest to a validated bank account.
Reading about tax rules can feel dry, but examples make them real. When you see how a fresher or a retired teacher gets money back, the process stops feeling like a puzzle. This article uses four short Indian stories so that you can follow each step with plain numbers.
Each example lists the income, the deductions, the slab tax, the rebate, the cess and the final refund. All figures are for the financial year 2025-26 (assessment year 2026-27) and use the rules on incometax.gov.in as known at the time of writing. Rules may change later, so confirm them before you file.
A Quick Look at the Rules Used
Before the examples, here is a short reminder. In the new regime, the standard deduction is Rs. 75,000 for salaried people and pensioners, the first Rs. 4 lakh is nil, and the rebate under section 87A removes tax for taxable income up to Rs. 12 lakh. In the old regime, the standard deduction is Rs. 50,000, the exemption limit is Rs. 2.5 lakh (Rs. 3 lakh for senior citizens), and the rebate is Rs. 12,500 for taxable income up to Rs. 5 lakh.
| Feature | New regime | Old regime |
|---|---|---|
| Standard deduction | Rs. 75,000 | Rs. 50,000 |
| Nil slab | Up to Rs. 4,00,000 | Up to Rs. 2,50,000 (Rs. 3,00,000 for seniors) |
| 87A rebate limit | Taxable income up to Rs. 12,00,000 | Taxable income up to Rs. 5,00,000 |
| 80C, 80D, HRA | Not allowed | Allowed |
| Cess | 4% | 4% |
Example 1: A Fresher in the First Job
Aman joined a company in Noida in August 2025 and earned Rs. 4,80,000 until March 2026. His employer deducted Rs. 3,000 as TDS over the last few months. This is his first ever tax return, and he wonders whether it is worth filing.
- Gross salary: Rs. 4,80,000
- Standard deduction: Rs. 75,000
- Taxable income: Rs. 4,05,000
- Slab tax: 5% of Rs. 5,000 = Rs. 250
- 87A rebate: Rs. 250
- Final tax: nil
Aman’s refund is the full Rs. 3,000. It may look small, but it is his money, and filing also starts his tax record, which will help later when he applies for a credit card or a home loan. A quick check with the tax return calculator would have shown him the same number.
Example 2: A Salary of Rs. 12.75 Lakh
Divya is a bank officer in Nagpur with a gross salary of Rs. 12,75,000. Her employer deducted Rs. 48,000 as TDS because it overlooked the rebate. She uses the new regime.
- Gross salary: Rs. 12,75,000
- Standard deduction: Rs. 75,000
- Taxable income: Rs. 12,00,000
- Slab tax: Rs. 20,000 + Rs. 40,000 = Rs. 60,000
- 87A rebate: Rs. 60,000
- Final tax: nil
Divya gets a refund of Rs. 48,000. This example shows why the Rs. 12 lakh limit applies to taxable income and not to gross salary. With the standard deduction, a salaried person can have a gross salary of up to Rs. 12.75 lakh and still pay nil tax.
Key takeaway: The 12 lakh rebate limit applies to taxable income after deductions. For salaried people in the new regime, that means gross salary up to Rs. 12.75 lakh can pay nil tax.
Example 3: A Senior Citizen With Pension and FD Interest
Mr. Gopal Menon, aged 66, lives in Kochi. He earns a pension of Rs. 4,20,000 and FD interest of Rs. 1,80,000 a year. The bank deducted 10% TDS on the interest, which is Rs. 18,000. He chooses the old regime.
- Pension plus interest: Rs. 6,00,000
- Standard deduction on pension: Rs. 50,000
- Deduction under 80TTB (interest, up to Rs. 50,000 for seniors): Rs. 50,000
- Taxable income: Rs. 5,00,000
- Slab tax: 5% of Rs. 2,00,000 (above the Rs. 3 lakh senior limit) = Rs. 10,000
- 87A rebate (taxable income up to Rs. 5 lakh): Rs. 10,000
- Final tax: nil
His entire TDS of Rs. 18,000 comes back as a refund. Seniors can also submit Form 15H to the bank in advance to avoid TDS, but where this was missed, the ITR is the way to recover it.
Example 4: An Old Regime Investor Who Should Compare
Harpreet is an engineer in Chandigarh with a gross salary of Rs. 11,00,000 and TDS of Rs. 85,000. He likes the old regime because he puts Rs. 1,50,000 in PPF and ELSS under 80C, pays Rs. 25,000 for health insurance, invests Rs. 50,000 in NPS and pays Rs. 1,50,000 as home loan interest.
- Gross salary: Rs. 11,00,000
- Standard deduction: Rs. 50,000
- Deductions: Rs. 1,50,000 + Rs. 25,000 + Rs. 50,000 + Rs. 1,50,000 = Rs. 3,75,000
- Taxable income: Rs. 11,00,000 – Rs. 50,000 – Rs. 3,75,000 = Rs. 6,75,000
- Slab tax: Rs. 12,500 + 20% of Rs. 1,75,000 (Rs. 35,000) = Rs. 47,500
- Cess at 4%: Rs. 1,900
- Total liability: Rs. 49,400
His refund in the old regime is Rs. 85,000 – Rs. 49,400 = Rs. 35,600. Now compare the new regime. His taxable income would be Rs. 11,00,000 – Rs. 75,000 = Rs. 10,25,000, and the tax of Rs. 42,500 would be wiped out by the rebate. His refund would be the full Rs. 85,000, which is Rs. 49,400 more. Putting money into PPF may still make sense for savings, but not always for tax.
Summary of the Four Examples
The table below puts all four results side by side, so that you can see the pattern at a glance. In each case, the refund equals the TDS paid minus the final liability.
| Person | Regime | Taxable income | TDS paid | Final tax | Refund |
|---|---|---|---|---|---|
| Aman (fresher) | New | Rs. 4,05,000 | Rs. 3,000 | Nil | Rs. 3,000 |
| Divya (bank officer) | New | Rs. 12,00,000 | Rs. 48,000 | Nil | Rs. 48,000 |
| Gopal (senior) | Old | Rs. 5,00,000 | Rs. 18,000 | Nil | Rs. 18,000 |
| Harpreet (engineer) | Old | Rs. 6,75,000 | Rs. 85,000 | Rs. 49,400 | Rs. 35,600 |
Benefits of Learning From Examples
Examples turn rules into habits. When you see that TDS and final tax are two different numbers, you stop assuming that the TDS cut by your employer is the correct tax. You also learn to ask better questions of HR, your bank and your CA.
- You understand how the 87A rebate works in real figures.
- You see why small refunds are still worth claiming.
- You learn when the old regime helps and when it does not.
- You can estimate your own refund by copying the pattern.
- You gain confidence to file the ITR yourself.
Challenges and Limitations of These Examples
These cases are simplified on purpose. They ignore capital gains, rental income, foreign assets, surcharge and brought-forward losses. Your own return may have several of these, and each adds its own rule.
The examples also assume that every rupee of TDS appears in Form 26AS and that your return is processed without changes. In real life, small mismatches, late TDS filings by a deductor or a pending demand can alter the refund. Always treat examples as a learning aid and check the final numbers with a tax professional if your case is complex. You can also verify a TDS figure with a TDS calculator.
Common Mistakes Beginners Make
- Thinking no tax means no return: A refund is lost if you do not file, even at nil tax.
- Confusing gross salary with taxable income: The Rs. 12 lakh limit applies after deductions.
- Forgetting 80TTB or standard deduction: Seniors and pensioners often miss them.
- Assuming the old regime is always better: Harpreet’s case shows it can cost more.
- Ignoring bank TDS: FD interest TDS is easy to miss if you only look at Form 16.
- Not e-verifying: The refund will not start until the return is verified.
Best Practices for Beginners
- Start with Form 26AS and AIS so that you know the TDS credited to your PAN.
- Calculate tax in both regimes, even if you think you know the answer.
- File before the due date to avoid the late fee and to get interest sooner.
- Seniors can submit Form 15H to avoid TDS on FD interest when tax is nil.
- Pre-validate your bank account and use the same name as on your PAN.
- Keep a copy of the acknowledgement and the intimation under section 143(1).
Conclusion
Aman, Divya, Gopal and Harpreet earn very different incomes, yet each follows the same path: find taxable income, apply the right slabs, subtract the rebate, add cess and compare with TDS. The result is either a refund or a payment, and both are easy to predict once you have seen a few cases.
Copy the steps with your own numbers, check them against Form 26AS and file on the incometax.gov.in portal. A few minutes of effort can bring your money back, with interest.
You can also try the CTC Calculator for related work.
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FAQs
Can I get a refund if my taxable income is below the basic exemption limit?
Yes. If any TDS was deducted, you can claim it back by filing your ITR. The final tax is zero, so the whole TDS amount is refunded, along with interest under section 244A.
How much salary can be tax free in the new regime?
For a salaried person, taxable income up to Rs. 12 lakh pays nil tax because of the rebate. With the standard deduction of Rs. 75,000, that means gross salary up to Rs. 12.75 lakh, if there is no other income.
Can senior citizens claim a refund on FD interest TDS?
Yes. If the bank deducted TDS but your total tax is nil or lower, you can claim the extra through your ITR. You can also submit Form 15H in advance to prevent the deduction.
Should I choose the old or the new regime for a bigger refund?
Compute both. The new regime often wins when deductions are modest, while the old regime can win if you claim large deductions like HRA, 80C and home loan interest.
What if my refund is different from my calculation?
Check the intimation under section 143(1) for the reason. Common causes are mismatches with Form 26AS, deductions not allowed or an old demand set off. You can file a rectification request on the portal if you disagree.
