Vivad se Vishwas Interest on Refund
This query is : Resolved
06 June 2022
An assessee had paid tax demanded and interest thereon in compliance to assessment order and also filed an appeal against the order. During pendency of appeal he applied for Vevadd se Vishwas and finally Form 5 has been issued. The assessee is entitled to some refund on account of excess payment of tax. Please let me know whether any interest may be claimed on such refund. Further, while filing VsV forms the assessee was not allowed credit for TDS which he now wants to claim separately. Will he be allowed to claim such TDS and interest thereon.
Please guide.
Please guide.
06 June 2022
Interest payment is automatic on refund. No need to claim.
In respect of TDS not claimed file rectification under tax credit mismatch.
In respect of TDS not claimed file rectification under tax credit mismatch.
10 June 2022
FAQ on Vivad se Vishwas Scheme says as under :
Q5. What if the disputed demand including interest has been paid by the appellant while being in appeal?
Appeals in which appellant has already paid the disputed demand either partly or fully are also covered. If the amount of tax paid is more than amount payable under Vivad se Vishwas, the appellant will be entitled to refund without interest under section 244A of the Act.
Whether the stand of CBDT is correct in denying interest ? Is it not unjust ? Is there any court decision allowing interest on refund ?
Q5. What if the disputed demand including interest has been paid by the appellant while being in appeal?
Appeals in which appellant has already paid the disputed demand either partly or fully are also covered. If the amount of tax paid is more than amount payable under Vivad se Vishwas, the appellant will be entitled to refund without interest under section 244A of the Act.
Whether the stand of CBDT is correct in denying interest ? Is it not unjust ? Is there any court decision allowing interest on refund ?
03 August 2025
This is a nuanced and important question about interest on refund under Vivad se Vishwas (VsV) Scheme and related TDS credit claims. Here's a detailed explanation:
1. Interest on Refund under Vivad se Vishwas (VsV) Scheme
CBDT's stand: As per the VsV Scheme FAQs and Circulars, when a disputed tax demand (including interest) has already been paid during the pendency of appeal, and the assessee settles the dispute under VsV,
any refund of excess tax paid is allowed but without interest under Section 244A of the Income Tax Act.
Legal provision: Section 244A(1) says interest on refund is payable if refund arises from excess tax paid, but CBDT has clarified that interest will not be paid if the amount is refunded due to VsV settlement where demand was already paid.
Rationale: The CBDT views the VsV payment as a settlement where interest on refund is excluded to incentivize early settlement and avoid prolonged litigation.
Is it unjust? Many taxpayers and experts feel this is harsh, but this is the administrative stance.
2. Court decisions on Interest on Refund under VsV
So far, there is no clear Supreme Court or High Court ruling forcing the CBDT to pay interest on such refunds arising from VsV.
Some taxpayers have challenged this denial in courts, but outcomes vary. No binding precedent clearly mandates payment of interest.
3. Claiming TDS Credit and Interest on TDS
If TDS credit was not allowed or claimed during VsV filing, the assessee can claim it separately.
The correct way is to file a rectification request under Section 154 or revise TDS return with the deductor to correct mismatch so the credit reflects in Form 26AS and the taxpayer's account.
Interest on delayed claim of TDS credit is generally not allowed unless a refund claim is involved and IT authorities recognize it.
Summary Table:
Issue CBDT/Legal Position Possible Taxpayer Action
Interest on refund under VsV No interest payable as per CBDT and VsV FAQs Challenging in court (uncertain outcome)
Refund amount arising from VsV Refund allowed without interest Accept refund without interest
TDS credit not allowed/claimed Can be claimed separately via rectification request File rectification/ revise TDS return
Interest on delayed TDS claim Generally not allowed Usually no interest, except in refunds
Conclusion:
Interest on refund under VsV is not payable as per current CBDT position and FAQs.
TDS credit can be claimed separately through rectification or correction of tax credit mismatch.
1. Interest on Refund under Vivad se Vishwas (VsV) Scheme
CBDT's stand: As per the VsV Scheme FAQs and Circulars, when a disputed tax demand (including interest) has already been paid during the pendency of appeal, and the assessee settles the dispute under VsV,
any refund of excess tax paid is allowed but without interest under Section 244A of the Income Tax Act.
Legal provision: Section 244A(1) says interest on refund is payable if refund arises from excess tax paid, but CBDT has clarified that interest will not be paid if the amount is refunded due to VsV settlement where demand was already paid.
Rationale: The CBDT views the VsV payment as a settlement where interest on refund is excluded to incentivize early settlement and avoid prolonged litigation.
Is it unjust? Many taxpayers and experts feel this is harsh, but this is the administrative stance.
2. Court decisions on Interest on Refund under VsV
So far, there is no clear Supreme Court or High Court ruling forcing the CBDT to pay interest on such refunds arising from VsV.
Some taxpayers have challenged this denial in courts, but outcomes vary. No binding precedent clearly mandates payment of interest.
3. Claiming TDS Credit and Interest on TDS
If TDS credit was not allowed or claimed during VsV filing, the assessee can claim it separately.
The correct way is to file a rectification request under Section 154 or revise TDS return with the deductor to correct mismatch so the credit reflects in Form 26AS and the taxpayer's account.
Interest on delayed claim of TDS credit is generally not allowed unless a refund claim is involved and IT authorities recognize it.
Summary Table:
Issue CBDT/Legal Position Possible Taxpayer Action
Interest on refund under VsV No interest payable as per CBDT and VsV FAQs Challenging in court (uncertain outcome)
Refund amount arising from VsV Refund allowed without interest Accept refund without interest
TDS credit not allowed/claimed Can be claimed separately via rectification request File rectification/ revise TDS return
Interest on delayed TDS claim Generally not allowed Usually no interest, except in refunds
Conclusion:
Interest on refund under VsV is not payable as per current CBDT position and FAQs.
TDS credit can be claimed separately through rectification or correction of tax credit mismatch.
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