Tax On Refund

sirji go to the section 234D

sunil

01. rate of intrest on income tax  Refund  6% P.A.

02. u/s 244 A

03. april to proceesing date means if return filed a.y. 2009-10 ( 01-04-08 to 31-03-2009) and interest calculate for 01 april 2009 to return processing date of dept.

Income Tax Act, 1961 Section 244A as on 16/01/2010

244A. Interest on refunds.

(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 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 two-third 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 143 or on regular assessment;

(b) in any other case, such interest shall be calculated at the rate of two-third 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 Chief Commissioner or Commissioner whose decision thereon shall be final.

(3) Where, as a result of an order under 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.

Interest on income tax refund is 0.5% per month and it is due from the next month of the closing of financial year means if Fy is 2006-07 then interest is due from 01.04.07.

It is taxable in hands of assessee.

amit is right..............

Interest on Refunds [Section 244A] :

Rate: 0.5% p.m. or part of a month

Amount : tax or penalty becoming refundable on account of excess payment of advance tax, advance tax on fringe benefits, TDS/ TCS and other tax or penalty becoming refundable.

Period for which the interest is payable:

- In case refund of any advance tax or TDS/TCS: from 1^st  April to the date of the grant of refund.

- In case refund of other taxes/penalties: from the date of payment of such tax or penalty upto    the date on which the refund is granted.

Note:

1.      In case refund of any advance tax or TDS/ TCS: No interest shall be payable if the amount of refund due is less than 10% of the tax determined u/s 143(1) or on regular assessment.

2.      Where there is a delay in granting refund and the reasons for such delay are attributable to the assessee, either wholly or in part, the period of the delay so attributable to the assessee shall be excluded from the period for which interest is payable.

3.      Where as a result of an order passed u/s 115WE(3), 115WF, 115WG, 143(3), 144, 147, 154, 155, 250, 254, 260, 262, 263 or 264 or an order of the Settlement Commission u/s 245D(4),  the amount on which interest was payable has been increased or reduced, the interest shall be increased or reduced accordingly

4.      Interest allowed u/s.244A is the income of the P.Y. in which it is allowed, and should be declared in the ROI furnished in the A.Y. relevant to the P.Y.

A very big hi to all the financial Gurus.

I've a simple question about tax refund. My salary falls into 30% tax bracket and the tax on FD interest, adds a lot to the paid tax. Instead of making a FD in bank, if I deposit a huge amount [assuming that this amount would be more than the TDS or liable tax] as advance tax on 30th March of a financial year and then go for refund after one year, will it be a more profitable option than bank FD, to me? Is the interest on refund, taxable?

Thanks.

Hi Vijay,

Nice idea of making a FD with Income Tax department. Here people try to avoid to pay the taxes and you are planning to make F.D by paying taxes in advance

But sorry my friend it will not be profitable:

a) the interest rate offered by the IT Laws is too low.

b) the interest earned on refund is taxable

c) You will loose liquidity of money

d) You may have to wait for the refund years together

So think and Invest

Interest earned on refund is taxable and sometimes u have to wait for years to get a refund.