Interest Rate for Income Tax Refund

Interest Rate for Income Tax Refund – Section 244A

Interest payable by an assessee, as specified in Section 244A, refers to income tax refunds and its various provisions. In this article, we look at the applicable interest rate for an income tax refund for different types of scenarios.

Interest on Refund of Income Tax

If the assessee is entitled to the receipt of refunds of any account under the Income Tax Act, he would be the beneficiary of refunds, along with the simple interest as calculated in the manner as discussed later on in this article.

Excess Payment of Advance Tax, Tax Deducted/Collected at Source

Where the refund arises out of any tax which is being collected at source under Section 206C or being paid by means of advance tax, or where the credit is being taken for tax deduction (TDS) as described in Section 199, pertaining to the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of 1.5% for each of the months or part of each month comprised in any of the following period:

  • From the 1st of April of the particular assessment year until the date of grant of refund, provided that the return of income has been furnished on or before the due date specified under Section 139(1).
  • From the date of furnishing of return of income until the date of grant of refund, excluding the above scenario.

Excess Self Assessment Tax Paid

In the given scenario, interest shall be calculated at the rate of 1.5% for every month or part of the month, for the period ranging between the date of furnishing or payment of tax, until the date on which the refund is granted.

Other Cases of Excess Tax Payment

Such interest shall be paid at the rate of 1.2% per month or part of the month, for the period commencing from the date of payment of tax or penalty until the date of grant of refund.

Refunds related to Orders on Appeals

Where refunds are due as a result of an order passed under any of the income tax appeals such as CIT appeal, appeals to the High Court or Supreme Court, etc, wholly or partly, the assessee shall be entitled to receive, in addition to the interest payable under Section 244A(1), an additional interest on such refund calculated at the rate of 3% per annum (total interest at the rate of 9% per annum) from the period ranging from the very next day of date of expiry of time allowed (which is three months from the end of the months from the date of order) until the date of grant of refund.

Refunds on Account of any Amount paid to the Credit of Central Government

Assessees entitled to refunds will receive a refund, along with Simple Interest calculated at the rate of 1.2% for every month or part of the month for any of the following periods:

  • The date from which the claim for refund is made in the prescribed form until the date of grant of refunds.
  • The date from which tax, which is due for refunds under this provision, is paid, until the date of grant of refunds.

Where no Interest is Calculated on Refunds

If the delay was caused by the assessee’s or deductor’s fault, whether wholly or in part, interest would be excluded on the particular period of default. Any further queries or dilemmas will be handled by any of the following personnel:

  • Principal Chief Commissioner
  • Chief Commissioner
  • Principal Commissioner
  • Any commissioner who has the power to make conclusive decisions.

Increase/Decrease in the Interest on Refund

The rate of interest may have an upward or downward shift due to any amendments in accordance with the various provisions. The interest would be processed accordingly.

Other Related Guides

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Form 31 Form 31 - Income Tax Application for a certificate under the first proviso to sub-section (1A) of section 230 of the Income-tax Act, 1961
Form 64F Form 64F - Income Tax Statement of Income distributed by a secularization trust to be provided to the investor under Section 115TCA of the Income-tax...

Post by Sreeram Viswanath

IndiaFilings is India's largest online compliance services platform dedicated to helping people start and grow their business, at an affordable cost. We were started in 2014 with the mission of making it easier for Entrepreneurs to start their business. We have since helped start and operate tens of thousands of businesses by offering a range of business services. Our aim is to help the entrepreneur on the legal and regulatory requirements, and be a partner throughout the business lifecycle, offering support at every stage to ensure the business remains compliant and continually growing.