Your IT Refund is at halt……..Who is going to benefit……
There is delay in processing of income tax return for Assessment year 2020-21 and assessees await for the same. The central board of direct taxes has notified extensions of dates for filling income tax returns for non-audit cases from July 31 to November 30 and now it further extended to 31st December. These relaxations were announced in order to provide more time to taxpayer for furnishing of income tax returns amid the pandemic and get completed with their compliance requirements.
The unusual amid pandemic is what about the taxpayers who have already filed their IT return for AY 2020-21 and not got their refund till now as the IT department has put a halt on processing on IT returns filed this year. No clarification has been provided so far in this regard. Usually, claim for refund by assessees is made if taxes (by way of TDS or excess advance tax paid) would have been already paid in excess over liable amount of tax which is arrived as per eligibility under Income tax rules provided there in the Act for each class of assessees.
Most of the refund claimants cheer up upon receiving refund credit to their bank account but in financial terms, it usually happens due to poor tax planning. The refund amount under such circumstances is eligible for interest, and that “interest” is taxable.
Section 244A of Income tax Act 1961, deals with interest on income tax refund , this interest is payable by income tax department mandatorily, if the refund is 10% or more of actual tax liability before TDS. Interest will be provided for 0.5% /month or 6% per annum to be calculated from 1st April of the assessment year in which return is filed till the date of grant of refund.
In simple words, if your actual tax liability before TDS is Rs.30000/- & you have deposited Rs. 55000/- as advance tax. In this case, excess tax paid is more than 10% of actual tax liability (55000-30000=25000). Here is tax payer is eligible for tax refund along with interest at 0.5% per month or 6% per annum .So suppose if you are granted a refund in feb 2020 for this assessment year, The interest amount in this case would be Rs. 1375/- (25000*0.5%*11 months) .
This interest on refund amount is considered as “Income from other sources”. So while filing income tax return for financial year 2020-21, this interest income will be taxed as per slab of the taxpayer. As per your entitlement, if you have claimed large refund on account of already excess advance tax paid, then on your way for this assessment year this delay in processing of return will cost you more.
Usually the credit of income tax process takes about 20-45 days from the date of E-verification of the income tax return. However, if ITR Acknowledgement has been sent physically to CPC it takes longer time. But this assessment year returns are not even started processing till now, issuing of refund will surely take good amount of time. The longer will be delay in processing of ITR, there will be delay in granting of refunds and it will ultimately lead to more interest income taxable in the hands of taxpayer.
In the interest of taxpayers and providing benefit of refunds to them, Income tax authorities should consider this fact of the Section 244A of Income tax Act 1961, that on one hand they are extending due dates to help taxpayer and on other hand they delaying the processing of IT return. This not only does some of tax payer money get stuck, it also earns interest of 6% pre-tax and opportunity benefits are foregoing.
Notification for delay in processing refund claims this year by the IT department may provide some clarification to large no. of tax payers who have already filed their return with request for refunds.
-Contributed by Anushka Bajpai-
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