Section 244A of the Income Tax Act, 1961, governs the interest paid by the Income Tax Department to taxpayers when refunds are delayed. This ensures taxpayers are compensated for the government’s use of their money.
🔹 Key Provisions of Section 244A
- When is Interest Payable?
Interest is paid if:
✅ Refund arises due to excess tax paid (TDS, advance tax, self-assessment tax).
✅ Refund is not issued within the stipulated time.
- Interest Rate & Calculation
| REFUND TYPE | INTEREST RATE | PERIOD FOR CALCULATION |
| Excess Advance Tax/TDS | 0.5% per month | From 1st April of the Assessment Year (AY) till refund date |
| Excess Self-Assessment Tax | 0.5% per month | From date of payment till refund date |
| Refund Due to Appeal/Order | 0.5% per month | From date of order till refund date |
- Minimum Interest
-
- No interest if refund ≤ 10% of tax liability.
- Rounded offto the nearest month (part months = full month).
🔹 Example Calculation
Case 1: Excess TDS Refund
- Assessment Year (AY):2025-26
- Refund Due:₹50,000 (from TDS)
- Refund Issued:15th December 2025
- Delay Period:1st April 2025 → 15th Dec 2025 = 5 months → 9 months
- Interest:₹50,000 × 0.5% × 9 = ₹2,250
Case 2: Self-Assessment Tax Refund
- Tax Paid (March 2025):₹30,000 (excess)
- Refund Issued:30th September 2025
- Delay Period:31st March 2025 → 30th Sept 2025 = 6 months
- Interest:₹30,000 × 0.5% × 6 = ₹900
🔹 Exceptions & Key Notes
✔ No Interest if:
- Refund delay is due to assessee’s fault(incorrect bank details, pending ITR verification).
- Refund is withhelddue to pending assessments.
✔ Taxable Interest: Interest received under Section 244A is taxable as “Income from Other Sources.”
✔ Fast-Track Refunds: E-verification of ITR speeds up refund processing.
🔹 How to Claim Delayed Refund Interest?
- Check Refund Statuson IT e-filing portal.
- File a Grievanceif refund is delayed beyond 3-6 months.
- Interest is Auto-Credited(no separate claim needed).
