Section 244A of Income Tax Act: Interest Along With Income Tax Refund
On account of excessive tax payments during a financial year, taxpayers are eligible to receive a tax refund. In simple words, if the tax paid by you is more than the payable amount, the government provides a tax refund. Furthermore, this refund that you receive also includes interest, as mentioned under Section 244A of the Income Tax Act.
The following sections discuss various provisions of this particular Section.
About Section 244A of Income Tax Act
The provisions under Section 244A of the Income Tax Act talk about the interest on income tax refund. As per this Section, when a taxpayer becomes eligible for a refund, he/she shall be entitled to get an interest on the refund amount in addition to the applicable sum. Here are the details regarding the calculation of interest u/s 244A of the IT Act:
- TCS, TDS or excess advance tax paid
In case of excess tax paid by way of tax deducted at source (TDS), tax collected at source or excess advance tax payment, you will receive 0.5% interest for each month or part of a month with regard to either of these periods:
- From April 1 of an assessment year until the date of refund initiation (Note that you must have filed your ITR before the due date.)
- From the ITR furnishing date till the date of refund initiation
- Excess payment of self-assessment tax
For excess payment of self-assessment tax, you will become eligible to receive interest. In this case, the income tax refund interest rate will be 1.5% every month. The calculation takes place by considering the date of filing your ITR or until the date on which your tax refund is granted, whichever comes earlier.
- Other situations regarding excess payment
If you have paid excess tax in an FY, but it does not fall under the categories mentioned above, you will receive interest at the rate of 1.2% per month. Under such a situation, the applicable interest under Section 244A of the Income Tax Act will be calculated from the date of tax payment to the date of refund generation.
Non-applicability of Interest on Income Tax Refund
You will not receive interest on tax refund in case of delay in proceedings on the part of the deductor or assess. In such a situation, the delay period will be eliminated from the period in which interest was payable. If you have any queries regarding non-applicability of interest on IT refund, you can reach out to —
- Principal chief commissioner
- Principal commissioner
- Chief commissioner
- Any other commissioner holding power to make decisions regarding this matter
Note that the provisions of Section 244A of the Income Tax Act are not applicable if your refund amount is lower than 10% of the payable tax amount. Let us understand this through an example:
Suppose you have a tax liability of Rs. 5,28,000, where you have already paid TDS amounting to Rs. 5,78,000. You are eligible to receive a refund of Rs. 50,000. However, in this case, you will not be receiving interest on the refund amount as it is less than 10% of the payable tax.
Also Read: Section 234A Of Income Tax Act: Interest For Delayed Tax Filing
Refunds Concerning Orders of Appeal
If your IT refund is pending because of any order passed under IT appeals, such as appeals to the Supreme Court/High Court, CIT appeal and more, then you are eligible to receive an additional interest. The interest on refund under Section 244A of the Income Tax Act will be calculated at an annual rate of 3%.
The initiation of this calculation will happen after the date of expiry of the allowed time until refund generation.
Increase or Decrease in the Interest on Refund
If any amendments are made to Section 244A of the Income Tax Act, you might witness an increase or decrease in the applicable interest rate. Thus, the processing of interest rates will happen depending on the latest amendments.
Also Read: Section 234F Of Income Tax Act: Filing ITR, Exemptions And Penalties
Final Word
If you have made excess payments towards income tax, the above sections detailing provisions of Section 244A of the Income Tax Act might be helpful. However, ensure to file your ITR before the due date to qualify for interest payment on the IT refund.
FAQs on Section 244A of Income Tax Act
Ans: Know that there are no separate steps to claim an ITR refund. All you need to do is file your ITR on or before the due date. Besides receiving interest under Section 244A of the Income Tax Act 1961, you must ensure to file your taxes correctly.
Ans: Typically, you should receive your income tax refund in your bank account within 45 days of filing ITR. However, if it takes longer than anticipated, you can contact the CPC regarding the delay in payment.
Ans: Yes, the interest that you receive on your income tax refund is taxable. This is because the amount is considered a part of your income. Thus, you should mention it in your gross total income while filing ITR for a particular financial year.
Ans: If your income tax refund payment is delayed from the IT Department’s end, then as per Section 244A of the Income Tax Act, you are eligible to receive interest at a rate of 0.5% from April 1 to the date on which the refund is granted.
Ans: If you do not receive the refund within the stipulated time, you need to visit the website of NSDL. You can check the refund status through this website. Depending on the information provided there, you will either have to resubmit your details or contact the jurisdictional assessing officer regarding the delay.
Disclaimer
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
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