Interest on Refunds [Section 244A] :

(1) Section 244A provides that interest at ½% for every month or part of a month shall be payable on tax or penalty becoming refundable on account of excess payment of advance tax, advance tax on fringe benefits, tax deducted at source or collected at source and other tax or penalty becoming refundable.

(2) The period for which the interest is payable will be –

(i) Where the refund is of any advance tax or tax deducted or collected at source, the interest shall be payable for the period starting from 1st April to the date of the grant of refund.

(ii) Where the refund is of other taxes/penalties, the interest shall be paid for the period starting from the date of payment of such tax or penalty upto the date on which the refund is granted.

(3) The assessee can claim interest on refund due also in pursuance of determination of total income under section 143(1) or on regular assessment. However, no interest shall be payable if the amount of refund due is less than 10% of the tax determined under section 143(1) or on regular assessment.

(4) Where there is a delay in granting refund and the reasons for such delay are attributable to the assessee, either wholly or in part, the period of the delay so attributable to the assessee shall be excluded from the period for which interest is payable. In case any question arises as to the period of delay attributable to the assessee, it shall be decided by the Chief Commissioner or Commissioner.

(5) Where as a result of an order passed under sections 143(3) or 144 or 147 or 154 or 155 or 250, 254, 260, 262, 263 or 264 or an order of Settlement Commission under section 245D, the amount on which interest is payable under section 244A is increased/reduced, the interes t shall be increased or reduced accordingly.

(6) Interest allowed under section 244A is the income of the previous year in which it is allowed, and should be declared in the return of income furnished in the assessment year relevant to the previous year.