Home > Income Tax > Interest and Penalties > Interest Payable to Assessee on Refunds – Sec 244A

Interest Payable to Assessee on Refunds – Sec 244A

Where any refund is payable to the assessee, the assessee is entitled to receive interest along with the refund as per the following provisions-

  1. When refund is of any advance tax paid or TDS or TCS the interest is payable at the rate of 0.5 percent per month or part of month from 1st April of Assessment year to the date of grant of refund.
    No interest is payable if the excess payment is less than 10% of the tax determined on regular assessment or under section 143(1).
  2. When refund is of tax other than advance tax paid or TDS or TCS the interest is payable at the rate of 0.5 percent per month or part of month from date of payment of tax or penalty to the date of grant of refund.

If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner whose decision thereon shall be final.

Vide Instruction no. 2/2007, dated march 28,2007, the board has reminded all Assessing officers that while granting refund to the assessees, care should be taken to ensure that any interest payable under section 244A on the amount of refund due should be granted simultaneously with the grant of refund and there should in no case any omission or delay in the grant of such interest. Failure to do so will be viewed adversely by the board and the officer concerned will be held personally accountable, inviting appropriate action from the board.

Case Law

Assessee deducted tax at source mistakenly under section 194A though no tax is required to be deducted. On assessee’s request the department granted refund of amount so deducted. The court held that on such refund interest was not available under section 244A as assessee was not liable to deduct TDS and he did so on its own erroneous impression. Universal Cables Ltd. v. CIT (2010 MP)

Bare Act for Sec 244A

Bare Act for Sec 244A

(1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely :—

(a) where the refund is out of any tax paid under section 115WJ or collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted:

Provided that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined under sub-section (1) of section 115WE or sub-section (1) of section 143 or on regular assessment;

(b) in any other case, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.

Explanation.—For the purposes of this clause, “date of payment of tax or penalty” means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand.

(2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner whose decision thereon shall be final.

(3) Where, as a result of an order under sub-section (3) of section 115WE or section 115WF or section 115WG or sub-section (3) of section 143 or section 144 or section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly.

(4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years :

Provided that in respect of assessment of fringe benefits, the provisions of this sub-section shall have effect as if for the figures “1989”, the figures “2006” had been substituted.

Leave a Reply

Your email address will not be published. Required fields are marked *

Get updates and weekly newsletter in your email. Join more than 10,000 subscribers !