If individual taxpayers have paid more tax than they owe, they can receive income tax refunds. To ensure you receive an income tax refund, be sure to file the ITR by July 31, 2024, for FY 2023-24 (AY 2024-25) to avoid a late filing fee, which is automatically deducted from any tax refund owed to you, if applicable.
When do you get no interest on tax refund despite eligible for a tax refund
If you are eligible for a tax refund after filing ITR then you are supposed to get this back along with an interest at a specified rate in case of delay in refund. However, this is not given in certain cases.
According to Pallav Pradyumn Narang, Partner, CNK, a CA firm, “Generally tax refunds carry interest at the rate of 0.5% per month or part of month for delay in the payment of the refunds.”
When the filed ITR is successfully processed, we receive an intimation informing about this under section 143(1). This intimation also mentions the total tax refund amount, if any. As per Dhruv Chopra, Managing Partner, Dewan P. N. Chopra & Co, a CA firm, “No interest on tax refund amount under section 244A is payable, if the amount of tax refund is less than ten per cent of the tax as determined under section 143(1) or on regular assessment.”
For refunds arising due to excess advance tax or TDS, the interest is calculated from the beginning of the assessment year to the date the refund is granted. “In other scenarios, such as refunds resulting from orders passed by the tax authorities, interest is calculated from the date of payment of the tax to the date the refund is issued,” says Ankit Jain, partner, Ved Jain & Associates.
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When would you not receive an income tax refund despite it being due from the tax department?
According to Chopra, the tax department doesn’t collect tax demands or grant tax refunds if the amount is less than Rs 100. “When a tax return is processed by the Centralised Processing Cell (CPC) of the Income tax department, they make adjustments to the total income offered to correct any apparent mistakes. If after such processing, any demand is created (meaning the taxpayer is liable to pay more), such demand is not collected by the tax department up to Rs 100. So, if demand is less than Rs 100, taxpayers need not pay that. Similarly, if the tax refund eligible after such processing is less than Rs 100, the tax department does not issue that refund also. Hence the tax department does not give income tax refunds if the amount is less than Rs 100,” he says.
What situations ensure that you get a tax refund?
Paying more income tax to the government than required under the law makes sure that you get a tax refund of the excess amount with interest as specified.
Jain explains when this ‘overpayment’ occurs.
“This overpayment can occur due to several reasons, such as excess tax deducted at source (TDS) by employers or other entities, advance tax payments exceeding the actual tax liability, self-assessment tax paid that is higher than the actual tax liability, or tax benefits and deductions not accounted for during tax payments,” he says.
According to Narang, a taxpayer is eligible for payment tax refund if they satisfy all the following conditions:
- Has paid excess tax or excess TDS has been deducted than the assessed tax liability, and
- Scrutiny of the respect assessment year’s ITR is completed or if not, then department is not of opinion that issuing refund will result in loss of revenue, and
- No other tax demand against the taxpayer is pending.
