Interest on Income tax Refund as per Finance Bill 2016

Presently section 244A provides for interest on refund at 0.5% for every month or part of a month. Where the return is filed before the due date specified in section 139(1), the refund interest would be paid from 1^st day of April of the assessment year.

Interest on income tax Refund if return is filed before Due date :-

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 one-half 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, if the return of income has been furnished on or before the due date specified under sub-section (1) of section 139;

Interest on income tax Refund ,If return is filed after Due date

The Finance Bill, 2016 that where the return is filed beyond the due date specified for filing the return, interest on refund would be granted from the date of furnishing of the return  to the date on which the refund is granted.

Interest on Self Assessement tax  paid  (Excess tax paid )

It is proposed by the Finance Bill, 2016 that where tax is paid under section 140A (i.e. self assessment tax) and refund arises to the taxpayer, such amount is also eligible for interest from the date of furnishing of the return or payment of tax whichever is later and upto the date on which the refund is granted.

No Interest is Payable if 

Provided that no interest under clause  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;

Interest for delay in giving effect to order:

Where the refund arises due to an order but not by means of fresh assessment or reassessment, the time limit prescribed in the newly proposed section 153(5) would apply.

The order giving effect to an order under section 250 or section 254 or section 262 or section 263 or section 264 must be passed within 3 months from the end of the month in which such order was received by Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. Where the Assessing Officer could not pass the order within the said 3 months it could be extended up to a maximum of another 6 months.

Section 244A(1A) proposed by the Finance Bill, 2016 provides for additional interest at3% per annum for the period after the date of expiry of the time limit prescribed in section 153(5) and upto the date of grant of refund. In effect, the taxpayer in such cases would be eligible for 9% interest per annum.

Date of Applicability of Section 244A

Section 244A of the Income-tax Act, with effect from the 1st day of June, 2016