Interest on Excess IT Refund u/s 234D

 Hello Friends,

My this blog is related to tell you about Interest on Excess Income Tax Refund under Sec 234D as per Income Tax Act.

  0.5% Simple Interest on the Excess Refund Amount 

 

Important Points to Remember

Section 234D: Interest on Excess Income Tax Refund

• If an assessee has paid excess tax, then he/she can claim the refund of the same in his return of Income and it will be refunded to him.

• Many times it may happen that an assessee is granted a refund at initial stage, that is at the time of intimation under the provision of Section 143(1).

• On the regular assessment (scrutiny assessment under Section 143(3) or best judgment assessment under section 144), the refund will be reduced. 

• In such a case the excess refund is recovered from the assessee along with interest under section 234D.

• No refund is due on regular assessment

• Amount refunded under section 143(1) exceeds the amount refundable on regular assessment

Rate of Interest & Period of Calculation

• Rate of interest under section 234D is levied at half percentage (½ %) per month or part of the month.

• Interest is imposed from the date of grant of refund under the section 143(1) till the date of regular assessment.

• In case of calculating the interest on an annual basis, the period for which the interest is to be calculated will be rounded off to a whole months. 

• For this purpose, the fraction of month comprised in a period will be ignored and the interest will be calculated based on the rounded off period.

• Calculating interest for a month or part of month (any number of days i.e. 5 days, 16 days, 25 days ...............) comprised in a period, any fraction of a month will be deemed to be a full month and the interest will be calculated based on the full month.

• The amount of tax in respect of interest to be calculated will be rounded off to the nearest multiple of hundred rupees. For this purpose any fraction of Rs.100 will be ignored and the amount so rounded off will be deemed to be the amount in respect of interest is to be calculated.

Example:

If a person is calculating interest under section 119A on Rs. 8490 for 4 months and 16 days, then any fraction of Rs. 100 need to be ignored and, hence, we will ignore Rs. 90 from Rs. 8490 and the balance amount will come to Rs. 8400, thus interest under section 119A will be computed on Rs. 8,400.  Further, the period of 16 days will be considered as full month and the interest will be computed for 5 months.

I hope it will be helpful to you.

Thanks and Regards

Kulvinder Kaur

B.Com(H), MBA (Finance)

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