If ITR is furnished by the assessee on or before the due date, then interest shall be payable from April 1 of the Assessment Year to the date on which the refund is generated.

Many taxpayers who have received their income tax refund are saying that they have not received any interest on the refund amount whereas a taxpayer is eligible to receive interest on refunds. However, tax experts say that although one is eligible to receive interest on tax refunds, all refunds are not eligible for interest. Let us understand when a taxpayer may not receive interest on a refund.

When can you claim a refund?

When the tax liability of an assessee in a particular financial year is less than the actual tax paid by way of tax deducted at source (TDS), tax collected at source (TCS), advance tax or self-assessment tax, then he is eligible for refunds. This refund can be claimed by filing an income tax return within the due date. The tax department then issues refund after processing the ITR.

Along with the refund the I-T Department also gives interest to eligible taxpayers. "The interest will be calculated at the rate of 0.5% for every month or part of month starting from the first month (April) of the assessment year," says CA Mansi Gupta.

However, this refund is paid provided two conditions are met. First, the ITR must be furnished by the assessee on or before the due date. Second, the refund amount must be more than 10% of the actual tax liability as determined in the regular assessment or summary assessment, said Ms Gupta.

For example, a taxpayer has already paid an income tax of Rs 3.20 lakh by way of TDS. But in the summary assessment after filing ITR, the actual tax liability of the taxpayer comes at Rs 2.98 lakh then the taxpayer will receive a refund of Rs 22,000 but without any interest, as the due refund amount is less than 10% of the tax liability of Rs 2.98 lakh.

In case the refund amount is more than 10% of the actual tax liability then interest @0.5% for every month starting from April 1 of the assessment year to the date on which the refund is granted is paid provided the ITR is filed within the due date. "If the refund is not furnished by the due date, then interest shall be calculated from the date of furnishing ITR to the date on which the refund is granted," said Ms Gupta.