It has been almost two months since the deadline for filing income tax returns on September 16. While some taxpayers have already received their refunds, others are still waiting anxiously to see when they will receive their money.
For those still in the queue, a common question arises: Does the government compensate for delayed tax refunds, and if so, how much?
To shed light on this matter, India Today spoke with CA (Dr) Suresh Surana, who explains the regulations regarding compensation for delayed refunds and the amount of interest taxpayers can anticipate.
According to Suresh Surana, the law clearly outlines the interest payable on delayed refunds. Under Section 244A of the Income Tax Act, 1961, when a refund is due to the taxpayer, they are entitled to receive simple interest at a rate of 0.5% for each month or part of the month.
This implies that if your refund is delayed by tax authorities, you could earn an annual interest of 6%, calculated on a monthly basis. Unlike compound interest, the amount does not accumulate on previously earned interest.
Simple interest is explained by Surana through a quick example. If a taxpayer is owed a refund of Rs 20,000 and the delay is three months, the interest would amount to Rs 300.
However, not all refund delays result in interest payments. The determining factor is accountability – whether the delay is caused by the taxpayer or the department.
The rule applies universally, regardless of whether you are a salaried individual, freelancer, business owner, Hindu Undivided Family (HUF), or a company, as long as excess tax has been paid and the delay is not the taxpayer’s fault.
Common reasons for refund delays include discrepancies in tax return details compared to government records, unvalidated bank accounts, PAN not linked to Aadhaar, pending scrutiny, outstanding tax demands, or technical issues during peak filing periods.
If you find that your refund or interest is missing, the initial step is to check your refund status on the income tax e-filing portal. Ensure all tax credits are reflected correctly and that your bank account is linked and validated.
In case of issues, you can request a ‘Refund Re-issue’ online for bank-related problems. If the refund amount is incorrect or interest has not been included, you can file an online rectification request under Section 154. Alternatively, you can raise a complaint on the e-Nivaran portal or contact the Centralised Processing Centre (CPC) in Bengaluru directly.
In conclusion, delayed refunds can be frustrating, but the law guarantees compensation as long as the delay is not the taxpayer’s fault. While the interest received may not be substantial, it ensures that the government faces consequences for withholding refunds.