'Refund of Tax' by Income Tax Department

2.3.      REFUNDS OF TAX

If, any assessment year an assessee pays the tax which is more than the amount for which he is actually chargeable and if the assessee proves excess payment before the Assessing Officer, section 237 empowers the assessee to claim a refund  of the excess. Once the Assessing Officer is satisfied about the excess payment made by the assessee, he can allow the claim or refund.

Under the following cases a claim to refund may arise –

    1. When tax is deducted at source from salary, interest on securities od debentures, dividend at a rate higher than the rate applicable to the total income of an assessee.
    2. When tax paid in advance exceeds the amount of tax actually payable as determined at the time of refular assessment.
    3. When tax calculated was higher due to some mistake and later on tax liability is reduced on account of rectification of a mistake.
    4. When tax was calculated at the higher rate on the payment given to non-residents whereas they were actually chargeable at a lower rate of income tax.
    5. When due to double taxation , the assessee is entitled to a double taxation relief.

A- Who is allow to Claim Refund of Tax ? [ Sec. 238(1) ]

Where the income of one person is included in the total income of any other person, the latter alone shall be entitled to a refund in case of excess payment of tax in this case.

In the case of  death, incapacity, insolvency, liquidation or other cause, a person is unable to claim or receive any refund due to him, his legal representative or the trustee or guardian or receiver, as the case may be, shall be entitled to claim or receive such refund for the benefit of such person or his estate.

A Claim for  Refund  must be filed in the prescribed form and verified in the prescribed manner. Where any part of the total income of a person claiming refund consists of dividends or any other income from which tax is deducted at source, the claim for refund shall be accompanied by a certificate which is issued by the tax-deducting authority. The claim for refund may be presented by the claimant or through an agent or may be send by post.

B- Time Limit for Claiming Refund of Tax [ Sec. 239(2) ]

No such claim shall be allowed, unless it is made within the period specified hereunder, namely :—

(a)  where the claim is in respect of income which is assessable for any assessment year commencing on or before the 1st day of April, 1967,  4 years from the last day of such assessment year;

(b)  where the claim is in respect of income which is assessable for the assessment year commencing on the first day of April, 1968, 3 years from the last day of the assessment year;

(c)  where the claim is in respect of income which is assessable for any other assessment year, [one] year from the last day of such assessment year;

(d)  where the claim is in respect of fringe benefits which are assessable for any assessment year commencing on or after the first day of April, 2006, 1 (one) year from the last day of such assessment year.

C- Refund of Tax on Appeal etc. [ Sec. 240 ]

Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the Assessing Officer shall refund the amount to the assessee without his having to make any claim in that behalf:

It is further provided that—

(a)  an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment;

(b)  the assessment is annulled, the refund shall become due only of the amount, if any, of the tax paid in excess of the tax chargeable on the total income returned by the assessee.]

D- Interest On Delayed Refunds of Tax [ Sec. 243 ]

Central Government shall pay the assessee simple interest at 15% p.a.  [fifteen per cent per annum ] on the amount directed to be refunded from the date immediately following the expiry of the period of 3 months aforesaid to the date of the order granting the refund.

(2) Where any question arises as to the period to be excluded for the purposes of calculation of interest under the provisions of this section, such question shall be determined by the Chief Commissioner or Commissioner whose decision shall be final.

[(3) The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989 or any subsequent assessment years.

E- Interest On Refund of Tax Where No Claim Is Needed [ Sec. 244 ]

Where a refund is due to the assessee in pursuance of an order and the Assessing Officer does not grant the refund within a period of 3 month [three months]  from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at 15% p.a. [fifteen per cent per annum ] on the amount of refund due from the date immediately following the expiry of the period of 3 months [three] months aforesaid to the date on which the refund is granted.

F- Interest on refunds of Tax [ Sec. 244A ]

Where refund of any amount becomes due to the assessee, he shall 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 paid or collected at source or paid by way of advance tax or treated as paid, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of 1½ % [one-half per cent] for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted:

Provided that no interest shall be payable if the amount of refund is less than 10% [ten per cent] of the tax on regular assessment;

(b)  in any other case, such interest shall be calculated at the rate of 1½% [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.

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