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Tax refund delay? Claim interest on due amount
May, 18th 2009

If youre a salaried individual working in any organisation in India, you know the irritation that overcomes you when a mail arrives asking you to declare you proposed investments for the year. You invariably end up putting down a very arbitrary selection of investments when the last day for submission dawns.

But this thoughtless could eventually lead to a lot of unnecessary anxiety. With your company deducting a lot more tax than they actually need to, youre most likely to be eligible for a tax refund.

Unfortunately, a tax refund is an extremely tedious process, fraught with delays, particularly if youre in one of the cities which doesnt have an electronic clearance system (ECS) or if you dont know which officials to approach.

To help you deal with this burden, SundayET gives you the guidelines on how you could deal with delays in tax refunds.

Before getting into the actual process, it is important to know some of the reasons that may have caused the delay.

If your bank account details or your PAN number is entered incorrectly in the form or you end up filing your tax in the wrong ward/circle, then the chances for delay are high, says Neeru Ahuja, partner, Deloitte.

Tax authorities have especially been known to cause delays in cases where the amount to be refunded exceeds Rs 5 lakh, citing additional approvals as the reason. According to Sonu Iyer, partner, Ernst & Young, delay could also be caused if litigation is pending against the refund claimed or against any other issues with higher level of authority.

For instance, if an individual is in appeal with Commissioner of Income Tax (Appeals) against an order passed by the assessing officer (AO) level, in our experience, the refund is generally not issued by the AO even though there is nothing in the law to this effect, says Iyer.


Moving on to the actual process. In ideal circumstances, you should be able to trace the status of your refund online at the NSDL website using your PAN number and entering the year for which you are to get the refund.

However, with the service being limited to metros, in most other cities you would need to check the status and claim your refund by visiting the tax office where you filed your returns.

You will need to fill Form 30, and attach a copy of the tax return filed, a copy of the withholding tax certificates and proof of tax deposited as advance tax or self-assessment tax. However, if you get no response from the assessing officer, then you will need to take this up further with a higher authority.

According to Mukesh Gupta, director, Wealthcare Securities , As the next step, the individual should write a letter to the Chief Commissioner of Income-Tax with a copy to the grievance cell and the concerned income tax officer and enclose copies of all the letters written to the assessing officer and a copy of the return filed. If this still doesnt help, you could contact the income tax ombudsman who has been appointed to facilitate this process.


Individuals also have the right to use the Right to Information (RTI) route to find out the reasons for delay of refunds.

If you dont receive a response from the Income-Tax Office within 30 days of your submitting the letter, then you could file an RTI application in the name of the accounts officer of the income-tax department of the government of India, including the photocopy of acknowledgment and other such documents.

According to Gupta, if no action is taken within 35-40 days of sending the RTI, then you could file a first appeal within the next 35-50 days. If you still dont receive any response then you could approach RTI activists for help with the final appeal to the Central Information Commission. Meanwhile, remember to retain photocopies of all the letter and papers that have been used in your communication with the Income Tax department.

Meanwhile, remember that it is also your right to claim interest on the amount that is due to you as a refund .

Where the refund of any amount becomes due to the taxpayer under the provisions of the I-T Act, he shall be entitled to receive simple interest on the amount of refund due in the return calculated at half percent for every month (or part of the month) from the date of actual payment of tax till the time such refund is granted, says Iyer.

Ahuja, however, warns that these calculations often involve mistakes and in the case of an error, would need to file a rectification application under Section 154 of the I-T Act. However, the rules are different for refunds dealing with advance tax money. If the amount of refund is less than 10% of tax, then you do not stand to get any interest on it.


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