Interest on Income Tax Refund Calculator (2023)

Most taxpayers pay extra taxes while paying their advance taxes. If you are one of them you might be eligible to get a refund from the IT department. And can also cash some interest on the refund. Let’s see how this is possible.

Interest on income tax is calculated on the basis of the sections the refund falls in the Income Tax Act. The interest on refund types can be either for the delay in refund payment which is paid to the taxpayer, or the interest on the excessive refund paid to the taxpayer during the first-time assessment of the ITR.  

The interest on Income Tax Calculator article is about interest on refunds, their calculations, section 244A, and draw interest on TDS refunds, etc. 

What is interest on income tax refund section 244A?

Section 244A accounts for the provisions for Interest on refunds. Section 244A is added to calculate the interest on the refund of any amount due to the taxpayer. This section caters to the following cases to process interest on refunds:

• When the refund is due to the assessee, the simple interest charged on the refund is calculated as per the following conditions:

1. When the refund is because of TDS/TCS collected as advance tax in the financial year after the assessment year. A simple interest of 0.5% is charged on the refund amount for the month or part of the month from the 1^st of April of the assessment year till the date of refund.

Conditions applied: No refund will be given if the total amount to be refunded is less than 10% of the tax as calculated under section 143.

2. Apart from advance taxes, for any other kind of refund cases of penalty or notice served to the assessee, simple interest at 0.5% is charged for every month or part of the month from the date of payment of taxes or penalty till the date of the refund credited to the assessee.

• If the Assessee is the cause of the delay of refunds, then the delay period is not included while calculating the simple interest on the total amount of the refund. Any type of issue will be handled by the Chief Commissioner or Commissioner and will be the final decision.

• In this case, if there is an increment or decrement in the amount to be refunded from the date of the notice served to the date of the final settlement. Then, the interest will also increase or decrease accordingly. However, in the case when the interest is reduced, the AO will serve a notice of demand to the Assessee, asking for paying back the excess amount paid as a refund to him. The AO will send a notice under section 156, as per this act’s provision. The amount to be paid back will be specified in the notice.

Therefore, it’s clear that section 244A has provisions for interest on refunds for the following scenarios:

• Tax Deducted at Source, Tax Collected at Source, and Advance Taxes
• When the self-assessment tax paid is more than the total tax liability.
• No interest payment for delays in proceedings caused by the Assessee.
• Zero payment as a refund if the total amount to be refunded is less than 10% of the tax paid.

Look for the provisions under the following sections while calculating income tax refunds!

Sections to consider while calculating income tax refund are section 115WE, section 115WF, section 115WG, 37[sub-section (3) of section 143, section 144, section 147, section 154, section 155, section 250, section 254, section 260, section 262, section 263 and section 264.

It’s not so uncommon for people to forget to file ITR. So, let’s see what can be done in this case!

What to do if the Assessee has not filed ITR?

If the Assessee has not filed an ITR through form 16 then, to claim the refund the assessee can fill up form 30. Form 30 allows the taxpayers to ask and make an appeal to the tax deductor, to check his tax payment history. By doing so, he can claim a refund if any extra taxes have been paid.

FAQs: Interest on Income Tax Refund Calculator

1. How to calculate interest on a TDS refund?

When the taxpayer is liable to get a refund for paying extra taxes as TDS/TCS or any advance tax, the interest is calculated on the excess amount at the rate of 0.5% for every month or part of the month till the date it is paid.  

2. How is interest on a tax refund calculated?

A simple interest of 0.5 % is levied on the amount to be calculated.  

3. How much interest is paid on an income tax refund?

Interest at the rate of 0.5% is charged on the refund and it’s credited after the ITR is processed by the AO. It can take up to 45 days to receive a refund. If there’s a delay in the refund, the assesse can check the status of the refund on the e-filing portal.

4. How to calculate interest on a TDS refund?

A simple Interest at the rate of 0.5% is charged on the refund amount for the period starting from the date of processing of the ITR to the date it has been paid by the IT Department. 

Conclusion

The Interest on income tax refund calculator answers the most common questions about tax refunds. The Simple interest is charged at 0.5%, and the period is from the 1^st of April of part of the month or every month till the date of payment of the refund. The provisions of income tax refund calculations are provided in section 244A of the Income Tax Act.   

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