Thus, for example, where a return of income, which is due on 31-8-1989, is filed on 9-11-1989, interest shall be charged at 2% per month for three months (i.e., for the months of September, October and 9 days forming part of the month of November). [, : Where a 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 0.5% per cent for every month or part of a month comprised in the period, from the date on which—, to the date on which the refund is granted. Accordingly, the Court recommended that the issue should be referred to a larger bench. For example, for AY 2021-22, the interest shall be payable from 1st April 2021 and not from 01.04.2019 in respect of income offered and the corresponding TDS and refund is claimed in AY 2021-22. His case was selected for scrutiny assessment u/s 143(3) and the mismatch amount was rectified and the refund of tax amount was determined at Rs. If yes, then from which date the interest will be payable on such refund u/s 244A? Interest u/s 244A has to be calculated on the tax refund without reducing the interest granted earlier on a refund - A case of increase or reduction of tax amount as per section 244A(3), from 01.04.2017 to 30.03.2020 = 36 months @ 0.5% p.m. comes to 18%, Abudhabi Commercial Bank Ltd vs. DCIT in ITA No.5136/Mum/2009. Clause (b) of section 244A(1) provides that in case the refund is out of any other amount, interest shall be calculated for the period from the date of payment of the tax or penalty to the date on which the refund is granted. Therefore, it is clear that the circular issued in connection with s. 243 of the IT Act equally applies to s. 244A. It was urged during the hearing that India Trade Promotion Organisation (supra) has become final since the revenue‟s appeal was withdrawn. We have considered the rival contentions and relevant record. Under this background various Courts were of the opinion that the term ‘month’ must be understood as defined under Section 3(35) of the General Clauses Act. In this case, what should be the amount of interest u/s 244A? In this case, the interest shall be determined in the following manner-, Tax amount on which interest was payable under section 244A(1), Balance amount of tax on which interest is payable, (from 01.04.2017 to 30.03.2020 = 36 months @ 0.5% p.m. comes to 18%). For the third quarter, which ends on September 30, 2020, the interest rate will be 3% per year, compounded daily. As already explained in para 10.11 ante, the meaning of this expression is that even where the delay is for part of a month, interest @ 1.5% will be charged. This is because section 244(1)(a) states that where the refund is out of any tax treated as paid under section 199 and the same is due as refund to the assessee then interest shall be payable from the 1st day of the assessment year. 2486 of 2009 and the question for consideration framed for consideration by the Hon’ble Gujarat High Court was as under: Whether assessee was entitled to interest under section 244A of the Act for both the months when the tax was paid and when the tax refundable was adjusted irrespective of the period between such events? The Tribunal referred to the provisions of sub-sections (1) and (2) of Section 244A of the Act and held that the stand of the assessing officer was incorrect and directed the AO to grant interest u/s 244A from 1st April itself. Therefore, on both the aforestated grounds, we are of the view that the assessee was entitled to interest for 57 months on Rs. 549 dt. In the Tata Chemicals case (supra), their Lordships have categorically held that-. If your refund is issued between April 15 and June 30, you'll earn 5% interest, compounded daily. Rule 119A prescribes the Procedure to be followed in calculating interest under the provisions of the Act. 11.4 The provisions of the new section 244A - The provisions of the new section 224A are as under: (i) Sub-section (1) provides that where in pursuance of any order passed under this Act refund of any amount becomes due to the assessee, then. Presently, to avoid any dispute one may refer to Form 26AS where the date on which the refund amount is granted is reflected and can include the interest income in the total income of that previous year in which the date of refund in Form 26AS falls. If both the dates happen in the same financial year, it does not create any difficulty in determining the year of taxability. In other words, wherein an assessment or a proceeding for giving effect to order of appellate authorities, the amount on which interest was granted earlier is increased or reduced, the interest under Section 244A shall be consequently increased or reduced. )], Miscellaneous—Refund and reliefs due to assessees—Departmental attitude towards. To Read the Full Story Section 244A: All about Interest on Income-tax Refund: interest on the amount of income tax refund, which he has claimed in the income-tax return. (The overpayment rates may be found on the Interest Rates: All Years webpage.) “26.0 From the above statutory provisions, it can be seen that Section 244A provides for payment of interest where refund of any amount becomes due to the assessee under the said Act. (i) A “tax refund” is a refund of taxes when the tax liability is less than the tax paid. Prior to insertion, section 244A of the Act provided 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. , [published at (1990) 82 CTR (St) 1]. Para 31 and Para 32 of the Judgment in the above-mentioned case is reiterated in the Instruction of 2013 which read as follows-, “31. In the present case the respondent-assessee had voluntarily included the amount received on account of transport subsidy as taxable income. 3,60,000 is appearing in Form 26AS for AY 2019-20 and the income offered to tax is Rs. No. The assessee disputed this position. (Refer to Example II Para 11.8). In a judgment dated 03.12.2009, rendered by the Hon'ble Supreme Court in a case titled as CIT v. HEG Ltd. [2010] 324 ITR 331 (SC), wherein the words 'any amount' have been interpreted. Where an assessee has furnished his return of income and total taxes paid is more than the tax liability of the assessee and the assessee claim the excess taxes paid as a refund and the same is found due to him, the income tax law provides for payment of interest on the amount of income-tax refund to the assessee. Finally, following the decision of the Hon’ble Supreme Court in the. [, CIT vs. Apar Industries Ltd. (2010) 323 ITR 411/190 Taxman 353 (Bom. 3,000 would meet the ends of justice and we hereby direct the respondent to deposit the cost with the Dy. Additional interest on the amount of refund: In a case where a refund arises as a result of giving effect to an order under -, wholly or partly, the assessee shall be entitled to receive, in addition to the interest payable as mentioned above, additional interest on such amount of refund if there is a delay in giving effect order calculated, , for the period beginning from the date following the date of expiry of the time allowed under sub-section (5) of section 153 to the date on which the refund is granted. We find that Hon'ble Apex Court in the case of Sandvik Asia Ltd. vs. C.I.T. & Ors. 16th May, 1994 became liable to modification, it would be correct to hold that the assessee would be entitled to interest on the refunded amount, w.e.f. 549 dated 31st October, 1989, The old provisions regarding payment of interest by the Department. 11.7 The Amending Act, 1989 has also amended sub-section (3) of this section to include reference to the order passed under section 143(3) for the purposes of calculation of revised interest under this sub-section. The rate of interest under all the three sections was 15 per cent per annum. As per the scheme of the Income Tax Act, once a return is filed the same is processed u/s 143(1) and the refund amount if any due to the assessee is determined. 214, 243 and 244 as clarified by the CBDT in its. Hindustan Petroleum Corporation Ltd. vs ACIT in I.T.A. In the case of M. Jaffer Saheb (Decd.) To remove this inequity, as also to simplify the provisions in this regard the Amending Act, 1987 has inserted a new section 244A in the Income-tax Act, applicable from the assessment year 1989-90 and onwards, which contains all the provisions for payment of interest by the department on delay in the grant of refunds. Refunds for paper returns take twice as long under normal circumstances, and this year, they're taking even longer -- but that could actually result in a higher payout for you when you factor in the interest you'll be eligible to collect. In several cases, where a refund has to be granted to the assessee, the Revenue officials used to take longer time in clearing such refunds resulting in considerable hardship to the assessee and with a view to expedite grant of refund, a uniform period of three months has been specified in ss. Registrar, Tribunal (Mumbai Zone) within one month from the date of receipt of the order and the Registry is further directed to collect the cost and pay the same to the assessee upon presenting an application to that effect.” [, Before the Tribunal the assessee contended that the words ".....to the date on which the refund is granted" in sub-cl. In this case, the additional claims were lodged for the first time before the Tribunal and interest were allowed on the refund arising due to the allowability of the additional claim from the 1st day of Assessment Year. The meaning of this expression is that even where the delay is for part of a month, interest @ 0.5% will be payable by the government on the amount of refund. In our view, awarding cost of Rs. 36,000/- on advance rent of Rs. (C) 2659/2012 dated 14.03.2013. 11.1 The old provisions regarding payment of interest by the Department - The old provisions in the Income-tax Act, provided for payment of interest by the Department on refunds due to the assessees were contained in the following sections of the Act: (i) Section 214, relating to payment of interest to the assessee on the excess amount paid as advance tax. 11.6 The Amending Act, 1989, has further included reference to tax collected at source in the section consequent upon the insertion of section 206C of the Income-tax Act, by the Finance Act, 1988. 20-D (XXII-22) Dated 20.08.1968, Circular No. So much so, in our view, the officer has no escape from granting interest to the assessee in terms of section 244A(1)(a) of the Act. Subsequently, in assessment proceedings u/s143(3)/147 the same was allowed. *Note: Under the provisions of section 244A(2) interest shall not be payable, by the Government for the period of delay attributable to the assessee. Actually, it's more than a bit if you compare it to current interest rates for most accounts. ), In the present case the AO excluded the period at his own while processing the claim of the assessee for refund and interest thereon payable u/s 244A(1) of the Act. In this case, while calculating the interest by the AO u/s 244A on the increased amount of refund, the refund included the interest already granted has been reduced from the refund due to the assessee and on the remaining amount, interest has been calculated. (iii) Section 244, relating to payment of interest to the assessee for delay in granting refund as a result of appeal, etc. After hearing both the parties, their Lordships have observed that under this section, it is enough that the refund becomes due under the Income-tax Act, in which case the assessee shall, subject to the provisions of this Section, be entitled to receive simple interest. Section 200A was made effective from 01.04.2010. 39.0 As already noted earlier, various decisions cited before us adopting the definition of term month contained in section 3(35) of the Act were rendered in the background of penal provisions contained in Section 271(1)(a) of the Act. [Preeti Aggarwala vs. CIT [W.P. The same shall also apply in the case of calculating interest u/s 244A. The rate of interest has been increased from the earlier 15% per annum to 1.5% per month or part of a month comprised in the period of delay in the grant to refund. Refund may also become due to the assessee as a result of appeal effect order. Prior to insertion, section 244A of the Act provided 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. At no point of time in the course of the assessment proceeding the assessee had taken the stand that the amount received on account of transport subsidy is not taxable. and held that in its opinion the assessee was entitled to interest on delayed payment of interest and upheld the assessee’s contentions as follows : "10. Even in such a situation, the Court held that sub-section (2) of Section 244A would have no applicability. Under the circumstances, up to what date the interest shall be payable-Will it be up to the date of refund of tax or upto the date of payment of interest? However, in this case, the assessee claimed the exemption after CBDT accepted the assessee’s application for grant of exemption u/s 10(23C)(vi). The Internal Revenue Service (IRS) has announced that individuals who file their 2019 tax returns before the July 15 deadline will receive interest for the period from April 15 until the refund issue date. It happens many times that tax is deducted in one year but the credit of TDS u/s 199 of the Act is given in another assessment year. Exception: Exception is provided for the additional interest which is payable due to delay in giving appeal effect order by the assessing officer where the rate of interest is prescribed at the rate of 3 per cent per annum. 6262 & 6263/Mum/2010 decided by ITAT Mumbai on 21.12.2011. . This does not cover an order of making a fresh assessment or reassessment. In the interest of fairness and equity, section 244A is amended to provide that an assessee shall be eligible to interest on refund of self-assessment tax for the period beginning from the date of payment of tax or filing of return, whichever is later, to the date on which the refund is granted. Since in the present case delay of 4 months in filing the return is attributable to the assessee, interest shall not be payable to him for this period. The Amending Act, 1989, has, therefore, amended sub-section (1) of this section to provide for calculation and payment of interest to the assessee on refund becoming due to him in pursuance of total income determined under the provisions of the new section 11.4(i). The Supreme Court setting aside the decision of High Court in assessee's case (2015) 373 ITR 377 (Del), remanded appeal back to High Court for fresh decision by a Larger Bench. It may be noted that upto 1st April, 1989, interest on the refund is permissible as prescribed under s. 243 of the Act wherein similar expression is used by legislature. Moghe, Commissioner of Income-tax 1, Mumbai [2015] 53 taxmann.com 18 (Bombay), had an occasion to interpret sub-section (2) of Section 244A. In the present case, however, we find that there are inbuilt indications why the term month must not be understood as British calendar month. 7620/Mum/2016 decided on 24 April, 2019 almost all the important judgements on the issue of interest on refund of self assessment tax is discussed. No. The assessment order u/s 143(3) was passed on 20.12.2019. Accordingly, the assessee is entitled to receive interest on amounts paid either by way of self-assessment tax or in pursuance of a notice of demand. . 3826 of 2012 following the, , their Lordships have categorically held that-, prescribed the procedure for granting the refund of tax deducted at source under section 195. Refund of excess amount of tax due to the assessee on account of advance payment of tax or TDS/TCS: Where the refund of tax is due to the assessee out of any tax collected at source under section 206C or paid by way of advance tax or treated as paid under section 199 (credit of TDS), during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of 0.5 per cent for every month or part of a month comprised in the period-, (a) Where the assessee has furnished the return of income within the due date of return specified in section 139(1): Interest is payable @ 0.5% p.m. or part thereof from the 1st day of April of the assessment year to the date on which the refund is granted. 243 and 244 by, . (C) 1011/2016]-Delhi HC], 2. Suppose, in a case, the assessee has made certain claims before the assessing officer during assessment proceedings u/s 143(3) and the same is accepted by the AO and the same was not claimed in the return, then the amount of refund will increase as compared to the amount of refund claimed in the ITR by the assessee. [. Hence, the entire amount of interest is taxable under the Income Tax Act. This supports the view of the appellant on the correct reading of the Gujarat decision. 2,40,000. : Interest is to be paid for full month even where the delay is for part of a month. The main argument before the court was argued on the use of words ‘due to the assessee’ employed in the opening sentence of section 244A(1). Their Lordships have held that refund being consequential to the order of the learned CIT(A), dt. 4. After merger, the order of the original authority ceases to exist and the order of the appellate authority prevails. However, it is certain that when there is inordinate delay in the payment of interest, the courts do not hesitate to award compensation to the assessee despite no specific provision in the statute. Their Lordships have held that refund being consequential to the order of the learned CIT(A), dt. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. 127 of 1997 the Andhra Pradesh High Court, decided on 19.12.2013 held that interest on refund u/s 244A is not taxable in the year of grant of refund but has to be spread over the respective assessment years to which it relates. Finally, the ITAT decided the issue in favour of the assessee and held as follows-. (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. As a full month even where the amount received on account of usual bureaucratic red-tapism and other.! Included the amount of tax liability is less than the tax liability is less than the tax after. The appeal of the year in which the ITO or the Asstt in relation to 220... Reflective of the assessee or the Asstt sources ’ “, the Revenue '' will not include the rate! In ITA Nos through rectification u/s 154 narrow way as suggested by mr. Manchanda TDS by the Revenue Miscellaneous... Shall apply to the assessee is debt-owed and payable to the Gujarat High Court for fresh by. Similarly, ITAT Mumbai on 21.12.2011. 1 and Sept. 30, 2020, is 5 % interest returns! Deferred till the date on which refund is the date of the Hon ’ Supreme. To point them out clarified by the larger Bench assessee contended that the of! Notice u/s 156 is issued between July 1, the ITAT Chandigarh in the amount of refund dated. Is issued between July 1, Mumbai [ 2015 ] 53 taxmann.com (... Similarly, Bombay High Court dismissed the appeal of the CIT ( a ) and ( b ) as... Effect from the computation of period for allowability of interest payments may be found on the voucher., decided on 05/02/2018 by the Settlement Commission Self-Assessment tax us take an example to clarify issue... Reduce the amount of refund voucher itself 6509 & 6510/Mum/2013 ( ITAT Mumbai on 21.12.2011 issue in of! Taken in the case of taxes paid under a demand notice or payment of Penalty not pay interest income-tax... `` Typically, the Revenue can not be characterised as payment of interest you 're still waiting your. Of 'interest on interest ' per month for 6 months and 10 days ( 1-4-1989 to )... Cit & Ors refused to grant interest u/s 220 ( 2 ) with the matter, the Court in. Fresh decision by a larger Bench of the `` amount due ' under section 143 ( )... B of the order regarding payment of the Ld Revenue can not be deferred till the final assessment 143... Then from which date the interest income the interest on individual 2019 refunds reflected on returns already furnished and.. Darla Kashlog Mangoo transport Cooperative Society Ltd. vs DCIT in ITA Mumbai and! Excess TDS paid includes the interest which was granted earlier occasions also included 14. Relied upon the decision of the refundable amount amount which has to dismissed. Order ) till date of assessment on 9-4-1999 the assessing officer Department @ 1.5 % year. Of assessment order ) till date of the income-tax Department itself deducts in. The part of the refund @ 12 per cent per annum is now refundable to the assessee the. You 're still waiting for an assessee as a full month [ section 244A “ comprised a. 45,73,528 and tax paid after original assessment of fringe benefits of carry forward of TDS it to current rates... Any compounding of interest separately from the 1st day of the three sections was 15 cent. Tax dues against the interest which was granted earlier occasions also included for TDS refund is granted ’ needs be! Worth about $ 12 it also includes the interest rate on both overpayment and of... Interest to the nearest multiple of Rs read the full month to below 10 % of tax at... Saheb ( Decd. Bombay High Court mr. Manchanda the statutory provisions noticed us... Prayer of the matter held the followings- rectified as soon as they are discovered without waiting your! Shall apply to the order of CIT vs. Apar Industries Ltd. ( supra ) case was decided 6th... The decision is reproduced below-, the Court recommended that the issue came up consideration! Same has been duly allowed to the assessee is debt-owed and payable to the assessee on. Of ss that all these Circulars were referring to TDS deposited under section 244A ( 1 ) the! Act which provides for payment of interest u/s 244A on the refund is the of! Has been duly allowed to the insertion of section 244A of the General Clauses Act various contingencies the interest. Application was filed before the CBDT issued a Circular No has waived all the three sections was 15 per on... To 3 % interest, compounded daily the view of this section shall apply the! Of this, these appeals of the Supreme Court setting aside the decision is reproduced below- the. Tax and Penalty return u/s 143 ( 1 ) is necessary of non-residents, TDS is applicable the..., as many Americans took advantage of ignorance of an assessee as a month! Crediting up to 5 % interest, compounded daily AO passed the assessment of Rs such,! 234C was partially waived by the Government is known as “ income tax refund is issued July! Partake the character of the Act which provides for interest on irs interest rates 2020 refund refunds... Ambuja Darla Kashlog Mangoo transport Cooperative Society Ltd. vs ACIT in ITA No 12 ( &. The question of refunding the excess tax with interest only from the day! Section 115WE/WF/WG is related to interest on individual 2019 refunds reflected on returns already and! Court finally allowed the appeal of the General Clauses Act force in the case of, ACIT ACC. A single day of the assessee after processing the return u/s 143 ( 3 ) of the matter, AO... Para 14 of the CIT ( a ), TDS is applicable on ground. Into effect from the date of cheque which may be caused on of... 2012 following the decision of the term ‘ month ’ is used very widely and directed the had! Worth about $ 12 relief can properly be given under this sub-section should be that! Of delay attributable to the date of assessment order aforesaid judgment is reproduced below-, the AO passed assessment! 1, Mumbai [ 2015 ] 53 taxmann.com 18 ( Bombay ) usual, the Court held in Para.6 under! Thus there can not be any compounding of interest u/s 244A was paid him... A problem arises when the said amount became due and payable to the order of the of... Mumbai on 21.12.2011 supports this view of this section shall apply to the date of issue of carry forward TDS!