There could come a time when you as a tax-payer will find yourself having accidentally paid an excess amount of money in tax. This situation could be extremely stressful since it is a loss of essential funds. However, the Income Tax Act provides you with security in such times. 

 

Section 244A of the Income Tax Act states that should a tax-paying citizen submit a tax amount that is higher than their tax liability, the excess amount paid will be returned to them as soon as this error is identified. For this, the you will be required to intimate the deductor regarding this through Form 30 and as soon as the appeal is validated not only will the excess amount be refunded, but you will also be given an additional interest amount paid to you for every month that has gone by since the payment of your taxes. 

Provisions Under Section 244A of the Income Tax Act, 1961

Section 244A of Income Tax Act of 1961 states that an assessee has the right to be beneficiary of an interest amount in addition to rightful claims for refund that they apply for as part of their Income Tax Return or ITR. This occurs in cases where the aforementioned assessee has paid a tax amount larger than they are liable to. Hence, Section 244A of the Income Tax Act of 1961 provides the citizens of India with their basic right of reclaiming their rightful share which they might have accidentally paid to the government as taxes. 

 

This could occur in various instances such as TDS, TCS, Advance Tax, Self-assessment Tax, etc. Therefore, it is crucial for every tax-payer to be mindful of rights like those provided by Section 244A.

Important Definitions under Section 244A

Reading Section 244A of the Income Tax Act of 1961 could sound a lot like jargon to you since complicated terminology and references are aplenty in this section. Hence, here are definitions of a few crucial terms that strongly pertain to a tax-payer to help you understand the provisions of Section 244A. 

1. Assessee

The assessee refers to you, the tax-payer, whose right to claim a refund of overcompensated taxes is stated in the provisions of Section 244A of the Income Tax Act of 1961. For example, the section states, “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,” wherein your right to claim a refund and an interest return on the additional tax amount is outlined. 

2. Deductor

The deductor refers to the Income Tax Department or respective taxing authority that eliminates the tax amount from the total amount.They may do this in the form of TDS, TCS, GST, Advanced Tax, etc. 

3. TDS

As you must have already established, TDS is a term frequently used in relation to Income Tax. TDS stands for Tax Deducted at Source. This is a fraction of a net income that is deducted before the gross income reaches the recipient. For example, when an individual receives their monthly salary, they are given a gross amount after deductions, such as EPF and taxes, have been made in their net salary.

4. TCS

TCS is usually applied to purchases made by a tax-payer. It stands for Tax Collected at Source. This is a percentage of tax that is attached as an addition to a principal amount. For instance, if you are to purchase a refrigerator worth ₹75,000, the total amount you will pay after billing could be ₹75,850. In this case, ₹850 would be the TCS collected at the very source of the exchange, which is the payment made by a consumer. 

5. Advance Tax

Advance tax, or earn tax, is a tax amount that is paid in parts much before a particular due date of completion of taxes. In such cases, you are not required to pay the total amount in one instance. You can start paying the tax in sections until the tax-paying date arrives. Taxes are to be paid by 15th March, hence, allowing you to start paying 15th June of the previous year. You can pay 15% by 15th June, then add up to 45% of the tax being covered by 15th September, 75% being covered by 15th December and finally, cover 100% of the tax amount 15th March.  

6. Self-assessment Tax

The term self-assessment tax is self-explanatory. It is a tax calculated by an income assessment done by the tax-payer. This process is usually carried out online where the tax-payer reports their incomes and derives a total tax amount to be paid. This tax is calculated after excluding advance tax, TDS, TCS, etc. 

Specifications of Section 244A of Income Tax Act

A special act for income tax, Section 244A allows tax-payers to receive due refunds in exchange for additional taxes that they may have accidentally due to miscalculation of taxes during income tax filing. This section also allows you to claim an interest return from the deductor and the specifications surrounding this section and its provisions are given as stated below. 

  • TCS, TDS or Advance Tax

At times, excess tax is accumulated from a single account through TDS (Tax Deducted at Source), TCS (Tax Collected at Source) and advance tax. This tax is rightfully supposed to be returned to the tax-payer, and as is the tax-payer’s right, an additional interest is to be paid by the deductor for holding that amount with them until the time of refund. 

 

As per this specification of Section 244A, you are eligible to receive 0.5% in interest for every month the deductor retains the excess tax amount. For example, if you are to receive a refund after 6 months after having paid excess taxes, you are entitled to claim a 3% interest. The interest is calculated as per an assessment year and not a financial year; Hence, taxes paid in March would have an interest rate calculated from April to the month of refund.  

  • Self-assessment Tax

In case of self-assessment tax, you are entitled to a refund and an interest payout of 1.5% for every month between the date of tax furnishing and the date of refund. It is important to note while calculating the interest payout on the basis of your excess tax that self-assessment tax is exclusive of TDS. TCS and advance tax. 

 

Should the deductor pay you the refund amount halfway through a particular month, the interest payout would still be calculated as 1.5% of the excess tax amount regardless of incompletion of that particular month. 

  • Other Excess Tax Payment

Various taxes exist that do not fall under the aforementioned categories. If the excess tax amount that you paid does not fit under any of the categories explained earlier, you can still claim a refund along with an interest payout. The interest rate under such circumstances would be 1.2% of the excess tax amount. As per Section 244A of the Income Tax Act, the interest calculation will begin at the date of tax furnishing until the date of refunding. 

 

*You may utilise a Section 244A interest calculator available on the internet in order to compute the interest amount that should reach you. 

TDS as per the Income Tax Act

Section of the Income Tax Act of 1961

Specifications

Taxation Rates

Section 192

Salaried Individuals

Regular Tax Slab

Section 192A

Accumulated Balance of Provident Funds

10%

Section 193

Interest Returns from Securities

10%

Section 194

Income from Dividends

10%

Section 194A

Interest Returns apart from Securities

10%

Section 194B

Income from prizes

30%

Section 194BB

Income from horse-race victories

30%

Section 194C

Payments to subcontractors/contractors

1% to 2%

Section 194D

Commission from Insurance

5%

Section 194DA

Payments of Life Insurance Policies

5%

Section 194EE

NSS (National Savings Scheme) Payments

10%

Section 194F

Repurchase of units by Mutual Funds or Unit Trust of India

20%

Section 194G

Commissions on sale of lottery tickets

5%

Section 194H

Commission and brokerage

5%

Section 194K

Units payable to a resident individual

10%

Section 194LA

Commission for acquisition of immovable assets

10%

Section 194LBA(1)

Interest that a business pays to unit holder through property purchase or rental

10%

Section 194LBB

Payments made Investment Funds to a unit holder

10%

Section 194LBC

Income through securing funds

25%

Section 194M

Commission or brokerage paid by an individual or undivided family to a resident

5%

Section 194N

Cash withdrawals in the previous year through a banking company or cooperative society

2%

Section 194O

Amount given to an e-commerce operator

1%

Section 194P

Tax deductions for super senior citizens

Tax on income as per current rate

Section 194Q

Payments above ₹50 Lakhs made in exchange for good and services

0.1%

Eligibility Criteria According to Section 244A

Section 244A of the Income Tax Act of 1961 states the rights of every tax payer in the country of India which enables them to claim any excess tax they might have paid and receive an additional interest amount for every month the excess tax was in possession of the deductor. To be able to exercise this right does not require much from you, and its eligibility criteria is stated below. 

  • You must be a resident individual tax-payer. 

  • If you are a non-resident Indian, under special circumstances, you are eligible for Section 244A. 

  • Interest and refund claims are applicable to the very same fiscal year as the tax furnishing. 

Conditions and Exemptions Under Section 244A

Let’s assume your total tax amount you paid is ₹10,000 out of which you happened to accidentally pay an extra tax amount of ₹50. The excess tax amount is only 5% of the total tax amount. Hence, in this case, you will not be eligible for an interest payout from the deductor. The excess tax amount is required to be more than 10% of the tax amount for you to be able to claim not only a refund, but also an interest payout depending on the type of tax category your amount comes under. 

 

In case an excess of TDS, TCS or advance tax is paid by you, you are eligible to claim a refund and an interest under Section 244A as well. The interest will be calculated from the April of that fiscal year, which is a month after you have furnished your tax liabilities and have found an excess amount paid, wherein you will be liable to 0.5% being added to your interest amount from April up to the month of refund payment. However, if you fail to furnish your taxes in time and, on assumption, pay your taxes in the month of June, your interest will be calculated strictly from June onward and not April, which is the first month of the assessment year.

Form 30

Form 30 is a crucial instrument that can help you reclaim your excess tax amount and access the benefit of an interest payout from the deductor. This excess payment could be due to a miscalculation or due to a miss in considering certain tax benefits earned through investments, insurance, charity, etc. As an active part of the tax-paying group of this country, it is your right to be able to acquire this refund along with an additional interest amount, as stated in Section 244A of the Income Tax Act, and Form 30 should be a great catalyst for you to let the deductor know of such hiccups. 

How to Apply for Refund

The first step to take is to declare payments such as investments, insurance premiums, fees, house rent, etc. in Form 16 as you file your income tax returns along with documentation. Form 30 comes to the rescue if you haven’t filed Form 16. 

 

Form 30 is a formal appeal made to the deductor to check into your tax payment history in order to establish whether or not any excess amount has been filed and paid as taxes. After investigation and confirmation through Form 30, you will be able to rightfully claim a refund and an interest amount added to that. 

Timeline as per Section 244A

Certain dates and timelines have to be abided by when it comes to filing your taxes and claiming your refunds. Any mistakes when it comes to crucial due dates or essential values can set your case back or worse, have your case be declared null and void. 

  • In an assessment year, an individual is allowed to claim a refund amount of up to ₹50 Lakhs only. 

  • Refund claims made for more than 6 consecutive assessment years will not be considered and the claim will be immediately nullified. 

  • No interest will be given to tardy claims for refund.

How is the Refund Made?

With an advancement in payment methods across all platforms, your tax refunds can reach you in convenient and safe ways. You could receive your refund and the interest amount (if applicable) through a bank transfer or via cheque. 

1. Bank Transfer 

The bank transfer is the most common method utilised in order to make sure that the refund amount reaches you safely. The bank account details that you provide during ITR filing will be the account that receives the refund and interest amount. This requires you to ensure that the banking details you provide to the deductor are absolutely accurate and valid. 

2. Cheque

The other refund method is through cheque. The deductor will opt for this means of payment if your bank details contain errors or inaccuracies. A cheque addressed to the primary account holder as stated by you, the tax-payer, during previous ITR filing. 

How Can You Track Your Refunds?

If you are to receive your refund via bank transfer, you may track the progress of the refund at http://www.incometaxindia.gov.in. Here, you will be asked to submit your PAN number and the respective assessment year.

 

A refund cheque will be issued and sent to you via speed post. You will  be provided with the details once the package is dispatched on the deductor’s behalf. There on, you may contact the delivery services in order to inquire for updates related to the progress of your post.

In Case of Delayed Interest Refund

If there are any delays in the refunding and transfer of interest, the deductor is liable to pay the interest amount at a 6% rate. In case of an excess tax payment when it comes to TDs, TCS or advance tax, the interest amount is to be computed from April to the month in which the refund is processed. Excess in the payment of self-assessment tax would invite interest calculations from the month of tax payment up until the month of refund.

FAQs

Why is an interest amount paid in addition to the refund?

Taxes directly impact the budget the government utilises for the betterment of the country, and hence, the additional tax amount will be refunded with an interest under Section 244A of the Income Tax Act. This is a lot like a fixed deposit. For every month that the deductor holds the funds, an interest amount is paid up to a certain rate. 

How will I get my refund?

You can receive your refund in the form of a bank transfer made directly to your primary bank account as reported or furnished during your regular ITR filings, or a cheque addressed to the primary bank account is issued and sent via speed post.

How can I apply for a refund?

You may apply for a refund by filing Form 30 as an appeal for your refund claim case to be investigated. This initiates a process of confirmation and verification which later decides whether or not your case is eligible for a refund.

How much interest will I get along with my refund for paying extra TDS?

Extra taxes paid through TDS will be given 0.5%/month of interest along with the refund according to Section 244A of the Income Tax Act. This will be calculated for every month between your tax-paying date and refund date.

Does Section 244A apply to NRIs?

Yes, Section 244A is applicable to non-resident Indians as well.

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