(Last Updated On: February 13, 2017)

Interest on refund due to deductor on excess TDS deducted

[Section 244A of Income Tax Act – Applicable from Assessment Year 2017-18]

Relevant extract of Budget Speech of union Budget 2017-18 on 01.02.2017 ( Annex III to Part B of Budget Speech )

Para 2.18. It is proposed to provide for grant of interest in case of refund of excess payment of TDS.

Relevant extracts from Explanatory memorandum to the provisions of Finance Bill 2017

Interest on refund due to deductor

The existing section 244A of the Act provides that an assessee is entitled to receive interest on refund arising out of excess payment of advance tax, tax deducted or collected at source, etc.

It is proposed to insert a new sub-section (1B) in the said section to provide that where refund of any amount becomes due to the deductor, such person shall be entitled to receive, in addition to the refund, simple interest on such refund, calculated at the rate of one-half per cent. for every month or part of a month comprised in the period, from the date on which claim for refund is made in the prescribed form or in case of an order passed in appeal, from the date on which the tax is paid, to the date on which refund is granted.

It is also proposed to provide that the interest shall not be allowed for the period for which the delay in the proceedings resulting in the refund is attributable to the deductor.

This amendment will take effect from 1st April, 2017.

[Clause 77]

Relevant Clause 77 of Finance Bill 2017

Amendment of section 244A.

77. In section 244A of the Income-tax Act,—

(i) after sub-section (1A), the following sub-section shall be inserted, namely:—

“(1B) Where refund of any amount becomes due to the deductor in respect of any amount paid to the credit of the Central Government under Chapter XVII-B, such deductor shall be entitled to receive, in addition to the said amount, simple interest thereon calculated at the rate of one-half per cent. for every month or part of a month comprised in the period, from the date on which––

(a) claim for refund is made in the prescribed form; or

(b) tax is paid, where refund arises on account of giving effect to an order under section 250 or section 254 or section 260 or section 262,

to the date on which the refund is granted.”;

(ii) in sub-section (2),—

(a) after the words “to the assessee”, the words “or the deductor, as the case may be,” shall be inserted;

(b) after the word, brackets, figure and letter “or (1A)”, the word, brackets, figure and letter “or (1B)” shall be inserted.

Relevant Note on Clause 77 of Finance Bill 2017

Clause 77 of the Bill seeks to amend section 244A of the Income-tax Act relating to interest on refunds.

The said section provides that an assessee is entitled to receive interest on refund arising out of excess payment of advance tax, tax deducted or collected at source, etc.

It is proposed to insert a new sub-section (1B) in the said section so as to provide that where refund of any amount becomes due to the deductor, then such person shall be entitled to receive, in addition to the refund, simple interest on such refund, calculated at the rate of one-half per cent. for every month or part of a month comprised in the period, from the date on which claim for refund is made in the prescribed form or for giving effect to an order under section 250 or 254 or 260 or 262 from the date on which the tax is paid up to the date on which refund is granted.

It is also proposed to amend sub-section (2) of the said section to give reference of the deductor in addition to the assessee and to provide that the interest shall not be allowed for the period for which the delay in the proceedings resulting in the refund is attributable to the deductor.

These amendments will take effect from 1st April, 2017.

Books on Budget 2017-18

Taxmann’s Budget 2017-18 -Book

Budget 2017-18- Notifications on Central Excise , Customs and Service tax – New Book

Ajit Prakashan’s Union Budget 2017-18 -New Book

BDP’s Customs Law Manual (2017-18 Budget Editon with CD) -New Book

Interest on refund due to deductor on excess TDS deducted w.e.f AY 2017-18