Will I also get any interest for the delayed refund?
Yes, Income Tax department takes the responsibility to make your wait for income tax refund a rewarding experience by granting simple interest @ 0.5 percent per month. However, this privilege is enjoyed by those taxpayers who have a refund of 10 percent or more of the actual tax liability. This is how the payment of interest will work:
In the case of refund arising out of TDS / TCS / Advance Tax – Interest is calculated @0.5% for every month or part of a month for a period starting on 1st April of relevant AY till the date of grant of refund in case the return is filed in time. However, if the return is not filed within the due date the period of interest shall be from the date of filing the return to the date of grant of refund.
In the case of refund arising out of Self-Assessment tax u/s 140A – Interest is calculated @0.5% for every month or part of a month for a period starting from the date of filing of return or payment of tax, whichever is later to the date of grant of refund. In this case also, if the refund is less than 10% of the tax determined under assessment, then you are not entitled to any interest.
In case of variation in the amount of refund – Where, as a result of an order u/s 143(3) / 144 / 147 / 154 / 155 / 250 / 254 / 260 / 262 / 264 or an order of the Settlement Commission u/s 245D (4), the amount of refund payable has been increased or reduced, then the amount of interest shall be increased or reduced accordingly. The assessing office may issue a demand notice for recovery of excess interest paid.
In any other case – Interest is calculated @0.5% for every month or part of a month for a period from the date of payment of tax to the date of grant of refund.
Suppose, Ms. Gupta has paid advance taxes of Rs. 50,000 over the year when she was actually liable to pay a tax of Rs. 30,000 only, then, in that case, she is entitled to a refund of Rs. 20,000/- along with the interest @0.5%. Let’s say, that Ms Gupta filed her return on 5.09.2016 i.e., after the due date and the refund of Rs. 20,000 is received by her on 30.11.2016, then, the interest payable shall amount to Rs. 300/-. (Rs. 20,000 x 0.5% x 3 months)
The Income Tax Officer may issue a demand notice for recovery of excess interest paid.
In case, any refund arises out of Income Tax Appeal, then you are entitled to additional interest over and above the one specified earlier, for delay beyond the time prescribed by the department (3 months from the end of the month in which the appellate order is received by the CIT) @ 3 percent per annum for the period beginning from expiry of prescribed period till the date of grant of refund.