Interest on Itax refund

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18 March 2011 What is the rate of interest on income tax refund? From which date it is calulated?

Aditya Maheshwari

Aditya Maheshwari (Expert)
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18 March 2011 Interest on refunds.

72244A. (1) 73[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 74[paid under section 115WJ or] 75[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 76[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:

Provided that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined 77[under 78[sub-section (1) of section 115WE or] sub-section (1) of section 143 or] on regular assessment;

(b) in any other case, such interest shall be calculated at the rate of 79[one-half 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.