Many of the people carrying on business and profession mostly claims refund of their TDS deducted or advance tax paid by them while filing their Income Tax return as the TDS is deducted on each and every sale/ service they do and tax is calculated on profit they earn so they end up claiming refund of TDS deducted and which many a times is a huge amount which gets blocked till the time their return of income is processed and refund is credited to their bank account and therefore government pays interest on such belated payment of refund as for a business each day their working capital is blocked it cost them the interest on same and in this post we shall discuss how you can calculate the amount of interest you will/ should get and if you are eligible for interest on your refund. Also this section not only covers refund which you get by filing your return of income but it also covers refund you get after any appeal.
Rate of interest on refund would be 0.5% per month for the month or part of month from the date mentioned in section or date of payment till the date on which refund is granted.
Interest eligibility and calculation in case of refund available after filing return of income:
The proviso to sub section (1) says that one would be eligible for interest on refund only when the amount of refund is more than 10% of the amount of total tax one was required to be paid.
- Where the refund amount is due to amount of TDS (i.e. tax paid u/s 199) or TCS (i.e. tax collected u/s 206C) or because of payment of advance tax, then interest shall be calculated at the rate of one-half percent (0.5%) from the 1st April of the Assessment year if the return of income is filed before the due date of section 139(1) and if return is filed after that then from the date of filing of return of income till the date refund is granted.
- In case refund is due to tax paid u/s 140A i.e. Self assessment tax then interest on refund shall be calculated from the date of filing return of income or payment of self assessment tax whichever is later to the date refund is granted.
- In case where refund arises against any demand raised by order under section 156, interest on such refund shall be calculated at 0.5% per month or part of month from the day when one pays any amount in excess of demand till the date when refund is provided.
As per sub section (1A) of section 244A “(1A) In a case where a refund arises as a result of giving effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264, wholly or partly, otherwise than by making a fresh assessment or reassessment, the assessee shall be entitled to receive, in addition to the interest payable under sub-section (1), an additional interest on such amount of refund calculated at the rate of three per cent per annum, for the period beginning from the date following the date of expiry of the time allowed under sub-section (5) of section 153 to the date on which the refund is granted.”
As per above section if refund arises due to order under section 250 (CIT(A) order), 254 (ITAT order), 260 (High Court Order), 262 (Supreme Court Order), 263 and 264 (CIT revision order) and the order is not for fresh assessment or reassessment then the assessee shall receive 0.25% interest in addition to 0.5% interest mentioned above from the expiry of time allowed under sub section (5) of section 153 (i.e. end of 3 month of the date of order) till the date refund is granted.
Under sub section (1B): If the refund becomes due excess TDS paid to the government then in that case refund shall be issued at rate of 0.5% from the day claim for refund is made in prescribed form or tax is paid in same appeal till the date refund is granted.
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