How politely refuse gift?

It depends. If someone goes out of their way to buy you something, especially for you, and tries giving it to you, you should take the gift and thank them. If you were to say no to them and tell them to go get their money back, that's kind of humiliating on their part. But if they try giving you something such as money, then yes, it is okay to tell them politely that you do not wish to take their hard earned money.