Section - 244A (of Income Tax Act, 1961), Interest on refunds

(1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely :—

(a) where the refund is out of any tax collected at source under section 206C (of Income Tax Act, 1961) or paid by way of advance tax or treated as paid under section 199 (of Income Tax Act, 1961), during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period,—

(i) from the 1st day of April of the assessment year to the date on which the refund is granted, if the return of income has been furnished on or before the due date specified under sub-section (1) of section 139 (of Income Tax Act, 1961); or

(ii) from the date of furnishing of return of income to the date on which the refund is granted, in a case not covered under sub-clause (i);

(aa) where the refund is out of any tax paid under section 140A (of Income Tax Act, 1961), such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period, from the date of furnishing of return of income or payment of tax, whichever is later, to the date on which the refund is granted:

Provided that no interest under clause (a) or clause (aa) shall be payable, if the amount of refund is less than ten per cent of the tax as determined under sub-section (1) of section 143 (of Income Tax Act, 1961) or on regular assessment;

(b) in any other case, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.

Explanation.—For the purposes of this clause, "date of payment of tax or penalty" means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 (of Income Tax Act, 1961) is paid in excess of such demand.

(1A) In a case where a refund arises as a result of giving effect to an order under section 250 (of Income Tax Act, 1961) or section 254 (of Income Tax Act, 1961) or section 260 (of Income Tax Act, 1961) or section 262 (of Income Tax Act, 1961) or section 263 (of Income Tax Act, 1961) or section 264 (of Income Tax Act, 1961), wholly or partly, otherwise than by making a fresh assessment or reassessment, the assessee shall be entitled to receive, in addition to the interest payable under sub-section (1), an additional interest on such amount of refund calculated at the rate of three per cent per annum, for the period beginning from the date following the date of expiry of the time allowed under sub-section (5) of section 153 (of Income Tax Act, 1961) to the date on which the refund is granted.

(1B) Where refund of any amount becomes due to the deductor in respect of any amount paid to the credit of the Central Government under Chapter XVII-B, such deductor shall be entitled to receive, in addition to the said amount, simple interest thereon calculated at the rate of one-half per cent for every month or part of a month comprised in the period, from the date on which—

(a) claim for refund is made in the prescribed form; or

(b) tax is paid, where refund arises on account of giving effect to an order under section 250 (of Income Tax Act, 1961) or section 254 (of Income Tax Act, 1961) or section 260 (of Income Tax Act, 1961) or section 262 (of Income Tax Act, 1961), to the date on which the refund is granted.

(2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee or the deductor, as the case may be, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable under sub-section (1) or (1A) or (1B), and where any question arises as to the period to be excluded, it shall be decided by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner whose decision thereon shall be final.

(3) Where, as a result of an order under sub-section (3) of section 115WE (of Income Tax Act, 1961) or section 115WF (of Income Tax Act, 1961) or section 115WG (of Income Tax Act, 1961) or sub-section (3) of section 143 (of Income Tax Act, 1961) or section 144 (of Income Tax Act, 1961) or section 147 (of Income Tax Act, 1961) or section 154 (of Income Tax Act, 1961) or section 155 (of Income Tax Act, 1961) or section 250 (of Income Tax Act, 1961) or section 254 (of Income Tax Act, 1961) or section 260 (of Income Tax Act, 1961) or section 262 (of Income Tax Act, 1961) or section 263 (of Income Tax Act, 1961) or section 264 (of Income Tax Act, 1961) or an order of the Settlement Commission under sub-section (4) of section 245D (of Income Tax Act, 1961), the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 156 (of Income Tax Act, 1961) and the provisions of this Act shall apply accordingly.

(4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years :

Provided that in respect of assessment of fringe benefits, the provisions of this sub-section shall have effect as if for the figures "1989", the figures "2006" had been substituted.