The Income Tax Act, 2025, has separate sections for tax refunds. Sections 431 to 438 contain the rules for refunds. These sections specify which taxpayers are eligible for a refund, and the interest rate for delayed refunds.
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The Income Tax Act, 2025, will come into effect on April 1st next year. It replaces the Income Tax Act, 1961. The government has attempted to simplify income tax rules in the new Act. Taxpayers will not face any difficulty understanding the language of the new Act. Experts say that the government has not made any fundamental changes to tax rules in the new Act. The question is, what are the rules for income tax refunds in the new Act?
Sections 431 to 438 contain the rules for refunds.
The Income Tax Act, 2025, has separate sections for tax refunds. Sections 431 to 438 contain the rules for refunds. Sections 237 to 245 of the Income Tax Act, 1961, contained the rules for refunds. The new sections on refunds explain when a taxpayer will be entitled to a refund, when the refund will be paid and how the interest on the refund will be calculated.
An income tax return will be required for a refund.
Section 433 of the Income Tax Act, 2025, states that a refund claim must be submitted through an income tax return. Section 431 states that a taxpayer will be entitled to a refund if their total tax payment exceeds their tax liability for that financial year. The tax paid will include TDS, advance tax, or self-assessment tax.
Interest on Delayed Refund Payments
The Income Tax Act, 2025, provides for interest on refunds. Interest will be paid to the taxpayer only if the refund is delayed. Section 437(1) states that interest will be paid at the rate of 0.5% per month on the refund amount. Experts say that the new Income Tax Act does not make any fundamental changes to the rules related to refunds. The interest rate on refunds remains at 0.5% per month.
No change in interest rate on refund amount
Section 244A of the Income Tax Act, 1961, deals with delays in tax refunds. It states that the Income Tax Department will pay taxpayers a simple interest rate of 0.5% per month (6% per annum) for delayed refunds. The new Act has been simplified.
