Wondering why you haven't received interest on your Income Tax refund? Find out the reason

The personal tax filing season for AY 2023-24 ended on July 31, 2023, with over 6.77 crore Income Tax Returns (ITR) filed. Those who missed this deadline can still file their ITR by December 31, 2023, by paying a late fee of either Rs. 1000 or Rs. 5,000, depending on their income. 

Currently, many eligible taxpayers are checking their accounts to see if the refund they had claimed in the ITR has been credited to their account or not. If a taxpayer has paid more taxes than their actual tax liability, they can claim the excess amount as a refund. However, the refund can only be claimed by filing the ITR. Some recipients of the refund have raised questions about the absence of interest on their income tax refund. 

Taxpayers are eligible to get interest on the refund claimed in the Income-tax return. The interest on the refund, arising from TDS, TCS, or Advance Tax, is calculated from April 1 of the Assessment Year until the date the refund is granted, if the return of income is filed before the due date. If the ITR is not filed by the due date, the interest is calculated from the date of filing the return of income to the date of refund.

The refund is granted after the Centralized Processing Centre (CPC) processes the Income Tax return. To receive a refund, taxpayers must select a pre-validated bank account. Therefore, ensuring that your bank account is pre-validated in your e-filing account is essential.

It is important to note that taxpayers are eligible for interest on refunds but not for all refunds. The tax department issues a refund after processing the ITR. However, no interest shall be payable if the refund amount is less than 10% of the tax determined on summary assessment or regular assessment. 

For example, if a taxpayer has a tax liability of Rs 10,48,000, and the TDS deducted was Rs 10,98,000, a refund of Rs. 50,000 can be claimed by filing an ITR. However, in this case, the taxpayer will not be eligible for interest on the refund of Rs. 50,000 since it is less than 10% of the tax amount. Had the refund amount been higher than the 10% of the tax determined, the taxpayer would have been eligible to receive the interest on the refund. 

If you have yet to receive the refund, you can check the status of your ITR at the e-filing portal to see if it is being processed or not. If your ITR is processed, the refund status can be checked on the TIN-NSDL portal. You need to enter PAN and Assessment Year for which you wish to check the refund status. It will show you the status of your Income-tax refund. 

The author is Tax Head at Coherent Advisors

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