Income Tax Refund: Under Section 244A of the Income Tax Act, interest is paid at the rate of 6% per annum on delayed refunds. However, in many cases, interest is not paid.
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Income Tax Refund: Many taxpayers are waiting for their income tax refunds. When refunds are not received on time, taxpayers are hoping for interest. The Income Tax Act also provides for interest on delayed refunds, but this is not always the case. In many cases, taxpayers do not receive even a single rupee of interest despite receiving a delayed refund.
There is a rule for paying interest on delayed refunds.
Under Section 244A of the Income Tax Act, interest is paid on delayed refunds at the rate of 6% per annum. This is calculated from April 1 of the assessment year until the date the refund is credited. However, there are some situations where taxpayers do not receive interest despite a delayed refund.
Refund processing has slowed recently due to various reasons, such as incorrect bank details, Aadhaar and PAN card mislinking, incorrect or fraudulent claims or incorrect deductions reported on returns, etc. CBDT Chairman Ravi Agarwal has stated that the tax department is closely scrutinizing returns with fraudulent claims and incorrect deductions. This is resulting in longer processing times.
Why isn’t interest paid?
CA (Dr.) Suresh Surana says that simply because a refund is delayed doesn’t automatically mean interest will be credited. He says, while Section 244A of the Income Tax Act provides for interest on delayed refunds, sometimes taxpayers don’t receive interest despite the delay. The key question is whether the delay in processing is due to the taxpayer himself. Dr. Surana says, “If the delay in processing or issuing a refund is due to the taxpayer, no interest is paid.”
This is especially true when the return contains incomplete information or contains errors. In this situation, the assessing officer asks for additional details. When a taxpayer responds late to notices or questions, the delay is considered their own fault, and interest is not paid.
This is also the reason for not receiving interest.
When a refund is received from self-assessment tax under Section 140A, the interest rules are more stringent. Surana explains that if the refund amount is due to an overpayment of tax, the refund will not be granted. This means that if a taxpayer voluntarily paid excess tax and later claims a refund, they will not receive interest on the excess amount. Furthermore, if the refund amount is less than ₹100, interest will not be paid.
