8 ways to use your income tax refund

Planning carefully for uncertain events which may put a significant financial burden on your family should be the foremost goal for people, said Archit Gupta, Founder and CEO, Clear, an online platform for financial services.

"If you don't have life and health insurance cover for yourself and your family members, consider it one of the first necessities and purchase a good insurance plan. It will give a tax benefit also," Gupta told CNBC-TV18.com.

The trick is to prepay the entire amount early in the tenure of the loan so that your total interest on the loan reduces, which, in turn, means you spend less time in debt. However, if you have some excess cash, you can prepay and get the monkey off your back even later in the loan tenure, Gupta said.

Once you receive a tax refund, you should calculate tax liability for that quarter of the period of a year and see if there is still any tax payable. For example, this is the second quarter going on. You should see what would be estimated tax liability for both these quarters of the financial year and check out whether you have paid due taxes. If there is any shortfall, you should use this refund receipt for this payment, said Sujit Bangar, Founder, Taxbuddy.com

If your finances are in good condition and you’re feeling generous, you could also donate your tax refund to a charity and deduct the charitable donation from your taxes.

If you have excess money, invest it in equity or equity-oriented funds for the long term. However, you must remember that investing in equity is a high-risk, high-return game. You can also invest in Equity Linked Saving Schemes and avail tax benefits.

Investment in retirement benefit schemes like NPS can help you in availing of a deduction of up to Rs 50,000 for the same over and above Section 80C deduction, Gupta told CNBC-TV18.com.

An emergency fund, also known as a contingency fund, is an essential corpus that you must keep aside to tackle emergencies that arise unexpectedly, such as a job loss, pay cut, or a medical emergency. So, if you have extra money at hand you can keep it as an emergency fund.

Various online skill courses allow you to challenge yourself and take on new learning experiences. This can benefit your personal and professional lives. Over time, a salary increase might be worth much more than the value of your refund today, Gupta said.