NEW DELHI: Many taxpayers who received income tax refunds were surprised when they realised the interest component was missing. As per rules, a taxpayer is eligible for interest on refunds but not all refunds.
Let’s understand when and how much interest one is eligible for.
The tax department issues a refund after processing an ITR.
“However, no interest shall be payable, if the amount of refund is less than 10% of the tax determined on summary assessment or regular assessment,” said Tarun Kumar, a Delhi-based chartered accountant.
For example, if a taxpayer has a tax liability of Rs5,48,000, his TDS deducted was Rs5,98,000, a refund of Rs50,000 can be claimed by filing an ITR. However, in this case, the taxpayer will not be eligible for interest on refund since it is less than the 10% of the tax amount.
Had the tax refund amount been higher, he would have been able to claim refunds.
In case the refund exceeds the limit, the taxpayer will get due interest. “If refund arises out of TDS, TCS or advance tax paid during the financial year, the interest shall be calculated at the rate of 0.5% for every month or part of month,” said Kumar.