Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live — the operative interest-on-refund code. Applies in respect of assessments for assessment year 1989-90 and subsequent years. Inserted by the Direct Tax Laws (Amendment) Act, 1987 in lieu of sections 214, 243 and 244; expanded by later Finance Acts (notably the additional interest in sub-section (1A) by the Finance Act, 2016).
FA 2026: Refund-interest framework preserved (interest at one-half per cent per month). Cross-Act position: a refund under the Income-tax Act, 1961 carries interest under section 244A; the parallel framework applies to refunds under the Income-tax Act, 2025. No change to the rate or computation by the Finance Act, 2026.
A. SECTION COMMENTARY
Section 244A is the self-contained, consolidated code for interest on refunds, applicable from assessment year 1989-90 onwards. It replaced the earlier sections 214, 243 and 244 (CBDT Circular No. 549 dated 31 October 1989). Interest runs, in general, at one-half per cent for every month or part of a month, the start date depending on the source of the refund.
The principal limbs are: clause (a) — refund out of TCS (section 206C), advance tax, or tax treated as paid under section 199, interest from the 1st April of the assessment year (or from the date of furnishing the return, where the return is belated); clause (aa) — refund out of self-assessment tax under section 140A, interest from the date of furnishing of the return or payment of tax, whichever is later; the ten-per-cent threshold (no interest under clause (a)/(aa) if the refund is less than ten per cent of the tax determined under section 143(1) or on regular assessment); and clause (b) — in any other case, interest from the date of payment of the tax or penalty. Sub-section (1A) (Finance Act, 2016) adds an additional three per cent per annum where a refund arising on giving effect to an appellate or revision order is delayed beyond the time allowed under section 153(5). Sub-section (1B) provides interest to a deductor on refunds of amounts paid under Chapter XVII-B. Sub-section (2) excludes periods of delay attributable to the assessee/deductor. Sub-section (3) adjusts the interest where the amount on which it was payable is later increased or reduced.
The case law settles several points. First, interest is payable on tax unauthorisedly retained by the State as a matter of course, including on refunds to a deductor of excess tax deducted and deposited under section 195 (Union of India v. Tata Chemicals Ltd.; followed in Universal Cables Ltd. v. CIT). Second, the words "any amount"/"amount due" in section 244A are wide enough to include the interest element, and a part-refund is appropriated first towards interest (CIT v. HEG Ltd.). Third, there is no interest-on-interest under section 244A: only the statutory interest may be claimed (CIT v. Gujarat Fluoro Chemicals, larger Bench), Sandvik Asia being confined to its facts. Fourth, refundable interest earlier paid under sections 234A-234C is itself an "amount" that attracts section 244A interest, and an order under section 245D(4) engages section 240 (K. Lakshmanya & Co. v. CIT).
Two further matters recur in practice. The start date for interest on a refund of self-assessment tax under clause (b)/(aa) has divided the Delhi High Court (Engineers India Ltd. taking one view and Sutlej Industries Ltd. another), and the conflict was referred to a Full Bench; practitioners should check the current position before computing such interest. And interest received under section 244A is itself taxable income (under "Income from other sources") in the year of receipt/accrual, subject to adjustment under sub-section (3) if the interest is later reduced.
Finance Act, 2026 position: the section 244A framework (interest at one-half per cent per month) is preserved. With the coming into force of the Income-tax Act, 2025, the cross-Act position is that a refund under the 1961 Act carries interest under section 244A while a refund under the 2025 Act carries interest under the corresponding provision of that Act; the Finance Act, 2026 makes no change to the rate or to the computation under section 244A.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025).
244A. (1) 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 thereon calculated in the following manner, namely :—
(a) where the refund is out of any tax collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period,—
(i) from the 1st day of April of the assessment year to the date on which the refund is granted, if the return of income has been furnished on or before the due date specified under sub-section
(ii) from the date of furnishing of return of income to the date on which the refund is granted, in a case not covered under sub-clause (i):
Provided that where refund arises as a result of an order passed by the Assessing Officer in consequence of an application made by the assessee under sub-section
(20) of section 155, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period from the date of such application to the date on which the refund is granted;
(aa) where the refund is out of any tax paid under section 140A, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period, from the date of furnishing of return of income or payment of tax, whichever is later, to the date on which the refund is granted:
Provided that no interest under clause
(a) or clause
(aa) shall be payable, if the amount of refund is less than ten per cent of the tax as determined under sub-section
(b) in any other case, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.
Explanation.—For the purposes of this clause, "date of payment of tax or penalty" means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand.
(1A) In a case where a refund arises as a result of giving effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264, wholly or partly, otherwise than by making a fresh assessment or reassessment, the assessee shall be entitled to receive, in addition to the interest payable under sub-section (1), an additional interest on such amount of refund calculated at the rate of three per cent per annum, for the period beginning from the date following the date of expiry of the time allowed under sub-section
(5) of section 153 to the date on which the refund is granted:
Provided that where proceedings for assessment or reassessment are pending in respect of an assessee, in computing the period for determining the additional interest payable to such assessee under this sub-section, the period beginning from the date on which such refund is withheld by the Assessing Officer in accordance with and subject to provisions of sub-section
(2) of section 245 and ending with the date up to which such refund is withheld, shall be excluded.
(1B) Where refund of any amount becomes due to the deductor in respect of any amount paid to the credit of the Central Government under Chapter XVII-B, such deductor shall be entitled to receive, in addition to the said amount, simple interest thereon calculated at the rate of one-half per cent for every month or part of a month comprised in the period, from the date on which—
(a) claim for refund is made in the prescribed form; or
(b) tax is paid, where refund arises on account of giving effect to an order under section 250 or section 254 or section 260 or section 262, to the date on which the refund is granted.
(2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee or the deductor, as the case may be, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable under sub-section
(1) or
(1A) or (1B), and where any question arises as to the period to be excluded, it shall be decided by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner whose decision thereon shall be final.
(3) Where, as a result of an order under sub-section
(4) of section 245D, the amount on which interest was payable under sub-section
(1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly.
(4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years :
Provided that in respect of assessment of fringe benefits, the provisions of this sub-section shall have effect as if for the figures "1989", the figures "2006" had been substituted. w.e.f. 1-10-2024.
C. AUTHORITIES
Section 244A is the most litigated refund provision. The authorities below settle (1) the duty to pay interest on unauthorisedly retained tax, including to deductors; (2) the breadth of "amount due" and the appropriation of part-refunds; (3) the bar on interest-on-interest; and (4) interest on refundable section 234A-C interest.
1. Interest on tax retained without authority — deductor's refund under section 195
Union of India v. Tata Chemicals Ltd. (2014) 363 ITR 658 (SC)
Facts: The assessee-deductor, on a reference under section 195(2), was directed to deduct tax on remittances to a non-resident. In appeal the CIT(A) held that reimbursement of expenses was not chargeable in the non-resident's hands; the tax deducted and deposited on that component thus became refundable to the deductor, which claimed interest on it.
Held: A tax refund due to a resident/deductor on excess tax deducted and deposited under section 195 must be refunded with interest under section 244A from the date of payment. The obligation to refund money received and retained without right carries with it the right to interest; "refund becomes due" the moment the State has no lawful authority to retain the sum. The Department's reliance on the absence of an express provision was rejected — section 244A is wide enough to cover the deductor's refund (the matter being governed by section 244A(1)(b) read with section 240).
Significance: The leading modern authority on the State's duty to pay interest on unauthorisedly retained tax. It anchors both the refund right (section 237/240) and the interest right (section 244A) and has been followed repeatedly, including by the Supreme Court in Universal Cables Ltd. v. CIT.
Universal Cables Ltd. v. CIT (Supreme Court) — following Tata Chemicals
Court: Supreme Court of India, following Union of India v. Tata Chemicals Ltd. (2014) 363 ITR 658 (SC).
Held: Applying Tata Chemicals, the Court reiterated that where tax has been collected/retained without authority, the assessee is entitled to a refund together with interest under section 244A; the State's obligation to refund carries with it the obligation to pay interest for the period of retention.
Significance: Confirms and follows the Tata Chemicals principle at the level of the Supreme Court, reinforcing that interest on unauthorisedly retained tax is a matter of course.
2. "Amount due" includes interest; appropriation of part-refund (interest first)
CIT v. HEG Ltd. (2010) 324 ITR 331 (SC)
Court: Supreme Court of India; judgment dated 3 December 2009 (2010) 324 ITR 331 / 189 Taxman 335.
Held: The expression "refund of any amount becomes due to the assessee" in section 244A, and the words "any amount", are wide enough to take in the interest element. Where the Department had wrongly retained both the principal refund and the interest accrued on it, the assessee was entitled to interest computed on the aggregate so withheld; the interest component partakes of the character of the "amount due". The Court also held that a part-payment of refund is to be appropriated first towards the interest due and the balance towards the principal.
Significance: Clarifies the breadth of "amount due" under section 244A and the order of appropriation of a part-refund (interest first). It is to be read with Gujarat Fluoro Chemicals: HEG concerns the correct quantification of the statutory refund withheld, not a freestanding claim to interest-on-interest.
3. No interest on interest — only statutory interest (Sandvik confined)
Held: Under section 244A only the interest provided for by the statute may be claimed by an assessee from the Revenue, and no further interest on such statutory interest. The Court clarified that the decision in Sandvik Asia had been "misquoted and misinterpreted": Sandvik was a case of an inordinate delay (of a decade or more) in paying interest that was lawfully due, for which compensation was awarded; it did not lay down a general rule entitling an assessee to interest-on-interest. "We clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest."
Significance: The controlling authority on the limits of section 244A. There is no compounding of interest; an assessee aggrieved by delay in paying the statutory interest itself must seek relief otherwise (Article 226), but cannot claim interest-on-interest as of right.
Sandvik Asia Ltd. v. CIT (2006) 280 ITR 643 (SC)
Court: Supreme Court of India; judgment dated 27 January 2006 (2006) 280 ITR 643 / 150 Taxman 591.
Held: Where the Revenue had delayed, for periods ranging from twelve to seventeen years, the payment of interest admittedly due to the assessee on refunds, the assessee was entitled to be compensated for that delay. The Court directed compensation measured by reference to the statutory rate.
Significance: Once widely cited for an "interest-on-interest" proposition, Sandvik Asia has since been expressly confined to its extraordinary facts by the larger Bench in CIT v. Gujarat Fluoro Chemicals (2014) 358 ITR 291 (SC), which held that it awarded compensation for egregious delay and did not create a general entitlement to interest on interest under section 244A. It must now be read subject to Gujarat Fluoro Chemicals.
4. Interest on refund of self-assessment tax (clause (b)/(aa))
On the start date for interest on a refund of self-assessment tax the Delhi High Court has been divided (Engineers India Ltd. one way, Sutlej Industries Ltd. the other) and the conflict was referred to a Full Bench; practitioners should verify the current position before computing such interest.
Stock Holding Corporation of India Ltd. v. N. C. Tewari, CIT (2014) 373 ITR 282 (Bombay)
Court: High Court of Bombay; judgment dated 17 November 2014 (2014) 373 ITR 282.
Held: Interest under section 244A is payable on a refund of self-assessment tax paid under section 140A. Section 244A(1)(b) is wide enough to cover such a refund: the Revenue must pay interest on the amount refunded from the date on which the tax was paid to the date the refund is granted. The CIT's order denying interest was set aside.
Significance: A leading High Court authority that self-assessment tax refunds carry section 244A interest under the residuary clause (b); read with clause (aa) inserted later, which expressly provides interest on section 140A tax.
CIT v. Birla Corporation Ltd. (Calcutta High Court) — section 244A(1)(b)
Court: High Court of Calcutta.
Held: Section 244A(1)(b) is a residuary provision under which interest on a refund of excess self-assessment tax is payable to the assessee; such interest runs from the date of payment of the tax to the date the refund is granted.
Significance: Supports the Stock Holding line that refunds of self-assessment tax attract interest under the residuary clause (b) of section 244A.
Held: Interest under section 244A is payable on a refund of excess self-assessment tax under the residuary clause (b), computed from the date of payment of the tax to the date the refund is granted; there is no warrant to exclude self-assessment tax from the expression refund of any amount.
Significance: One of the High Court decisions establishing the assessee's entitlement to section 244A interest on self-assessment-tax refunds, later reinforced by the insertion of clause (aa).
5. The section 244A(2) exclusion — only delay attributable to the assessee
Court: High Court of Bombay; judgment dated 21 June 2010 (2010) 330 ITR 340.
Held: Where the tax (there, TDS) had been deducted and deposited with the exchequer in time, section 244A(2) could not be invoked to deny interest merely because the TDS certificates were furnished during the assessment proceedings rather than with the return; that did not amount to a delay "attributable to the assessee". Interest under section 244A(1) was therefore payable in full.
Significance: Illustrates the narrow compass of the section 244A(2) exclusion: only a delay genuinely attributable to the assessee is excluded, and the Revenue must point to such attributable delay (and, ordinarily, record a finding to that effect).
Held: Revising a claim during the assessment proceedings is not, by itself, a delay attributable to the assessee within section 244A(2); the Revenue cannot deny interest on that basis. The exclusion in sub-section (2) is confined to delay genuinely caused by the assessee.
Significance: Reinforces the narrow reading of the section 244A(2) exclusion, alongside Larsen & Toubro.
Held: (i) An order of the Settlement Commission under section 245D(4) is an order passed in "other proceeding under this Act", so that a refund flowing from it falls within section 240. (ii) The words "refund of any amount" in section 240 are of wide import and include a refund of any amount of whatever character, including interest earlier paid under sections 234A to 234C. (iii) Where, consequent on a waiver of interest under sections 234A-234C by the Settlement Commission, interest already paid becomes refundable, that refund carries statutory interest under section 244A(1)(b) — the case being one of refund of interest paid, not of interest on interest. Section 244A is wider than the former section 244, it being sufficient that any amount of refund becomes due.
Significance: Settles that refundable interest (paid under sections 234A-C) is itself an "amount" that attracts section 244A interest, and that section 245D(4) orders engage section 240; it carefully distinguishes the impermissible interest-on-interest of Gujarat Fluoro Chemicals.
7. A refund is a debt; interest on recomputation refunds and refunds to non-residents
PCIT v. Punjab & Sind Bank (2022) 145 taxmann.com 31 (Delhi)
Court: High Court of Delhi (2022) 145 taxmann.com 31.
Held: A sum directed to be refunded to the assessee is a debt owed by the Department, and interest is liable to be paid on it under section 244A(1)(b); where excess tax (there, on re-computation) is refundable, interest runs from the date of payment to the date of grant of refund. The clause (b) residuary limb applies to refunds not falling within clauses (a)/(aa).
Significance: Confirms that a refund is a debt carrying interest and that section 244A(1)(b) is the residuary charging limb for interest on refunds, including refunds arising on re-computation.
CIT v. Punjab Chemical & Crop Protection Ltd. (2015) 231 Taxman 312 (Punjab & Haryana)
Court: High Court of Punjab & Haryana (2015) 231 Taxman 312.
Held: The assessee is entitled to interest under section 244A on a refund of excess self-assessment tax, the High Courts (Bombay, Delhi, Madras, Karnataka and Punjab & Haryana) having taken the consistent view that such refunds fall within section 244A.
Significance: Part of the settled High Court line that self-assessment-tax refunds carry section 244A interest.
DIT v. Credit Agricole Indosuez (Bombay High Court) — interest on refund to a non-resident
Court: High Court of Bombay.
Held: Interest on an income-tax refund received by a non-resident is taxable, but is not effectively connected with the permanent establishment; on the refund-interest entitlement, a non-resident is equally entitled to interest under section 244A on amounts refundable to it.
Significance: Confirms that section 244A interest is available on refunds due to non-residents; relevant to cross-border refund computations.
Reliance Infrastructure Ltd. v. DDIT (ITAT Mumbai, ITA No. 7509/Mum/2010, dated 28 January 2011) — ITAT
Forum: Income-tax Appellate Tribunal, Mumbai D Bench (J. Sudhakar Reddy, AM and V. Durga Rao, JM).
Held: Interest under section 244A(1)(b) is allowable and must be granted on a refund of tax paid in pursuance of an order under section 201 (deductor held in default and tax paid, then found refundable on the matter being set aside). The Tribunal followed the Supreme Court in ITO v. Delhi Development Authority (2001) 252 ITR 772 and earlier Tribunal orders (including Tata Chemicals Ltd. v. DCIT (2007) 16 SOT 481 (Mum)).
Significance: A Tribunal authority extending section 244A(1)(b) interest to refunds of TDS paid under a section 201 order; consistent with the later Supreme Court decision in Union of India v. Tata Chemicals Ltd.
Tata Chemicals Ltd. v. DCIT (2007) 16 SOT 481 (Mumbai) — ITAT (precursor to the Supreme Court decision)
Forum: Income-tax Appellate Tribunal, Mumbai.
Held: A deductor who has deducted and deposited tax under section 195 and is later found to have over-deposited is entitled, on refund, to interest under section 244A; the amount over-retained by the Revenue carries interest as a refund due under the Act.
Significance: The Tribunal-stage decision on the deductor's refund-interest entitlement, the principle of which was subsequently affirmed by the Supreme Court in Union of India v. Tata Chemicals Ltd. (2014) 363 ITR 658 (SC).
Maruti Suzuki India Ltd. v. CIT (2020) 119 taxmann.com 40 (Delhi)(Trib.) — ITAT
Forum: Income-tax Appellate Tribunal, Delhi (ITA Nos. 2553 and 2641 (Delhi) of 2013 and others); order dated 31 August 2020.
Held: Interest is payable on a refund arising out of payment of self-assessment tax under section 140A even though the refund is less than ten per cent of the tax determined. Self-assessment tax is not part of the prepaid taxes (TDS and advance tax) governed by clause (a); it falls under the residuary clause (b) of section 244A(1), to which the ten-per-cent embargo in the proviso to clause (a) does not apply. Whenever the assessee is entitled to a refund there is a statutory liability on the Revenue to pay interest on sums wrongfully retained.
Significance: A Tribunal authority confirming that the ten-per-cent threshold does not bar interest on self-assessment-tax refunds (which fall under clause (b)); complements the Stock Holding/Cholamandalam High Court line.
Jethiben K. Patel (Discretionary Trust) v. DCIT (ITAT Ahmedabad, 2024) — section 244A(1A)
Held: Additional interest under section 244A(1A) (the further three per cent per annum where a refund on giving effect to an appellate/revision order is delayed) is available on a delayed refund; the additional-interest provision, inserted by the Finance Act, 2016, operates prospectively from 1 June 2016, so it applies to the period of delay falling on or after that date.
Significance: A Tribunal authority on the scope and effective date of the section 244A(1A) additional interest, confirming both the entitlement and its prospective (1 June 2016) operation.
Avada Trading Co. (P) Ltd. v. ACIT (2006) 100 ITD 131 (Mumbai)(SB) — ITAT, Special Bench
Held: Interest received under section 244A is chargeable to tax as income (under the head Income from other sources) in the year of its receipt; it does not await the framing of the regular assessment. Further, where interest under section 244A is subsequently reduced (for example, on appeal under section 244A(3)), the consequent withdrawal/recomputation can be given effect by rectification under section 154, the matter being one that falls within that section.
Significance: The leading Tribunal authority on the taxability and timing of section 244A interest, and on the use of section 154 to correct interest that is later varied; routinely applied by Benches dealing with refund-interest assessments.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the local Act (base text amended up to the Finance Act, 2025); the publisher's footnote apparatus and amendment-marker brackets have been removed, and three asterisks (***) denote words or a sub-section omitted by amendment and retained only to mark the omission. Finance Act, 2026 changes are flagged in the commentary. Citations are stated as reported. Where a section has not been the subject of a direct reported decision, that is stated candidly and the nearest governing authority or circular is given. This digest is for professional reference and is not legal advice.
CHAPTER XIX — REFUNDS
Section 244A — Interest on Refunds
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live — the operative interest-on-refund code. Applies in respect of assessments for assessment year 1989-90 and subsequent years. Inserted by the Direct Tax Laws (Amendment) Act, 1987 in lieu of sections 214, 243 and 244; expanded by later Finance Acts (notably the additional interest in sub-section (1A) by the Finance Act, 2016).
FA 2026: Refund-interest framework preserved (interest at one-half per cent per month). Cross-Act position: a refund under the Income-tax Act, 1961 carries interest under section 244A; the parallel framework applies to refunds under the Income-tax Act, 2025. No change to the rate or computation by the Finance Act, 2026.
A. SECTION COMMENTARY
Section 244A is the self-contained, consolidated code for interest on refunds, applicable from assessment year 1989-90 onwards. It replaced the earlier sections 214, 243 and 244 (CBDT Circular No. 549 dated 31 October 1989). Interest runs, in general, at one-half per cent for every month or part of a month, the start date depending on the source of the refund.
The principal limbs are: clause (a) — refund out of TCS (section 206C), advance tax, or tax treated as paid under section 199, interest from the 1st April of the assessment year (or from the date of furnishing the return, where the return is belated); clause (aa) — refund out of self-assessment tax under section 140A, interest from the date of furnishing of the return or payment of tax, whichever is later; the ten-per-cent threshold (no interest under clause (a)/(aa) if the refund is less than ten per cent of the tax determined under section 143(1) or on regular assessment); and clause (b) — in any other case, interest from the date of payment of the tax or penalty. Sub-section (1A) (Finance Act, 2016) adds an additional three per cent per annum where a refund arising on giving effect to an appellate or revision order is delayed beyond the time allowed under section 153(5). Sub-section (1B) provides interest to a deductor on refunds of amounts paid under Chapter XVII-B. Sub-section (2) excludes periods of delay attributable to the assessee/deductor. Sub-section (3) adjusts the interest where the amount on which it was payable is later increased or reduced.
The case law settles several points. First, interest is payable on tax unauthorisedly retained by the State as a matter of course, including on refunds to a deductor of excess tax deducted and deposited under section 195 (Union of India v. Tata Chemicals Ltd.; followed in Universal Cables Ltd. v. CIT). Second, the words "any amount"/"amount due" in section 244A are wide enough to include the interest element, and a part-refund is appropriated first towards interest (CIT v. HEG Ltd.). Third, there is no interest-on-interest under section 244A: only the statutory interest may be claimed (CIT v. Gujarat Fluoro Chemicals, larger Bench), Sandvik Asia being confined to its facts. Fourth, refundable interest earlier paid under sections 234A-234C is itself an "amount" that attracts section 244A interest, and an order under section 245D(4) engages section 240 (K. Lakshmanya & Co. v. CIT).
Two further matters recur in practice. The start date for interest on a refund of self-assessment tax under clause (b)/(aa) has divided the Delhi High Court (Engineers India Ltd. taking one view and Sutlej Industries Ltd. another), and the conflict was referred to a Full Bench; practitioners should check the current position before computing such interest. And interest received under section 244A is itself taxable income (under "Income from other sources") in the year of receipt/accrual, subject to adjustment under sub-section (3) if the interest is later reduced.
Finance Act, 2026 position: the section 244A framework (interest at one-half per cent per month) is preserved. With the coming into force of the Income-tax Act, 2025, the cross-Act position is that a refund under the 1961 Act carries interest under section 244A while a refund under the 2025 Act carries interest under the corresponding provision of that Act; the Finance Act, 2026 makes no change to the rate or to the computation under section 244A.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025).
244A. (1) 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 thereon calculated in the following manner, namely :—
(a) where the refund is out of any tax collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period,—
(i) from the 1st day of April of the assessment year to the date on which the refund is granted, if the return of income has been furnished on or before the due date specified under sub-section
(1) of section 139; or
(ii) from the date of furnishing of return of income to the date on which the refund is granted, in a case not covered under sub-clause (i):
Provided that where refund arises as a result of an order passed by the Assessing Officer in consequence of an application made by the assessee under sub-section
(20) of section 155, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period from the date of such application to the date on which the refund is granted;
(aa) where the refund is out of any tax paid under section 140A, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period, from the date of furnishing of return of income or payment of tax, whichever is later, to the date on which the refund is granted:
Provided that no interest under clause
(a) or clause
(aa) shall be payable, if the amount of refund is less than ten per cent of the tax as determined under sub-section
(1) of section 143 or on regular assessment;
(b) in any other case, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.
Explanation.—For the purposes of this clause, "date of payment of tax or penalty" means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand.
(1A) In a case where a refund arises as a result of giving effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264, wholly or partly, otherwise than by making a fresh assessment or reassessment, the assessee shall be entitled to receive, in addition to the interest payable under sub-section (1), an additional interest on such amount of refund calculated at the rate of three per cent per annum, for the period beginning from the date following the date of expiry of the time allowed under sub-section
(5) of section 153 to the date on which the refund is granted:
Provided that where proceedings for assessment or reassessment are pending in respect of an assessee, in computing the period for determining the additional interest payable to such assessee under this sub-section, the period beginning from the date on which such refund is withheld by the Assessing Officer in accordance with and subject to provisions of sub-section
(2) of section 245 and ending with the date up to which such refund is withheld, shall be excluded.
(1B) Where refund of any amount becomes due to the deductor in respect of any amount paid to the credit of the Central Government under Chapter XVII-B, such deductor shall be entitled to receive, in addition to the said amount, simple interest thereon calculated at the rate of one-half per cent for every month or part of a month comprised in the period, from the date on which—
(a) claim for refund is made in the prescribed form; or
(b) tax is paid, where refund arises on account of giving effect to an order under section 250 or section 254 or section 260 or section 262, to the date on which the refund is granted.
(2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee or the deductor, as the case may be, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable under sub-section
(1) or
(1A) or (1B), and where any question arises as to the period to be excluded, it shall be decided by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner whose decision thereon shall be final.
(3) Where, as a result of an order under sub-section
(3) of section 115WE or section 115WF or section 115WG or sub-section
(3) of section 143 or section 144 or section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section
(4) of section 245D, the amount on which interest was payable under sub-section
(1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly.
(4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years :
Provided that in respect of assessment of fringe benefits, the provisions of this sub-section shall have effect as if for the figures "1989", the figures "2006" had been substituted. w.e.f. 1-10-2024.
C. AUTHORITIES
Section 244A is the most litigated refund provision. The authorities below settle (1) the duty to pay interest on unauthorisedly retained tax, including to deductors; (2) the breadth of "amount due" and the appropriation of part-refunds; (3) the bar on interest-on-interest; and (4) interest on refundable section 234A-C interest.
1. Interest on tax retained without authority — deductor's refund under section 195
Union of India v. Tata Chemicals Ltd. (2014) 363 ITR 658 (SC)
Court: Supreme Court of India; judgment dated 26 February 2014 (2014) 363 ITR 658 / 363 ITR 658 (SC) (also 222 Taxman 225 / 267 CTR 89).
Facts: The assessee-deductor, on a reference under section 195(2), was directed to deduct tax on remittances to a non-resident. In appeal the CIT(A) held that reimbursement of expenses was not chargeable in the non-resident's hands; the tax deducted and deposited on that component thus became refundable to the deductor, which claimed interest on it.
Held: A tax refund due to a resident/deductor on excess tax deducted and deposited under section 195 must be refunded with interest under section 244A from the date of payment. The obligation to refund money received and retained without right carries with it the right to interest; "refund becomes due" the moment the State has no lawful authority to retain the sum. The Department's reliance on the absence of an express provision was rejected — section 244A is wide enough to cover the deductor's refund (the matter being governed by section 244A(1)(b) read with section 240).
Significance: The leading modern authority on the State's duty to pay interest on unauthorisedly retained tax. It anchors both the refund right (section 237/240) and the interest right (section 244A) and has been followed repeatedly, including by the Supreme Court in Universal Cables Ltd. v. CIT.
Universal Cables Ltd. v. CIT (Supreme Court) — following Tata Chemicals
Court: Supreme Court of India, following Union of India v. Tata Chemicals Ltd. (2014) 363 ITR 658 (SC).
Held: Applying Tata Chemicals, the Court reiterated that where tax has been collected/retained without authority, the assessee is entitled to a refund together with interest under section 244A; the State's obligation to refund carries with it the obligation to pay interest for the period of retention.
Significance: Confirms and follows the Tata Chemicals principle at the level of the Supreme Court, reinforcing that interest on unauthorisedly retained tax is a matter of course.
2. "Amount due" includes interest; appropriation of part-refund (interest first)
CIT v. HEG Ltd. (2010) 324 ITR 331 (SC)
Court: Supreme Court of India; judgment dated 3 December 2009 (2010) 324 ITR 331 / 189 Taxman 335.
Held: The expression "refund of any amount becomes due to the assessee" in section 244A, and the words "any amount", are wide enough to take in the interest element. Where the Department had wrongly retained both the principal refund and the interest accrued on it, the assessee was entitled to interest computed on the aggregate so withheld; the interest component partakes of the character of the "amount due". The Court also held that a part-payment of refund is to be appropriated first towards the interest due and the balance towards the principal.
Significance: Clarifies the breadth of "amount due" under section 244A and the order of appropriation of a part-refund (interest first). It is to be read with Gujarat Fluoro Chemicals: HEG concerns the correct quantification of the statutory refund withheld, not a freestanding claim to interest-on-interest.
3. No interest on interest — only statutory interest (Sandvik confined)
CIT v. Gujarat Fluoro Chemicals (2014) 358 ITR 291 (SC) — larger Bench
Court: Supreme Court of India; three-Judge (larger) Bench; judgment dated 26 February 2014 (2014) 358 ITR 291 / 1 SCC 743.
Held: Under section 244A only the interest provided for by the statute may be claimed by an assessee from the Revenue, and no further interest on such statutory interest. The Court clarified that the decision in Sandvik Asia had been "misquoted and misinterpreted": Sandvik was a case of an inordinate delay (of a decade or more) in paying interest that was lawfully due, for which compensation was awarded; it did not lay down a general rule entitling an assessee to interest-on-interest. "We clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest."
Significance: The controlling authority on the limits of section 244A. There is no compounding of interest; an assessee aggrieved by delay in paying the statutory interest itself must seek relief otherwise (Article 226), but cannot claim interest-on-interest as of right.
Sandvik Asia Ltd. v. CIT (2006) 280 ITR 643 (SC)
Court: Supreme Court of India; judgment dated 27 January 2006 (2006) 280 ITR 643 / 150 Taxman 591.
Held: Where the Revenue had delayed, for periods ranging from twelve to seventeen years, the payment of interest admittedly due to the assessee on refunds, the assessee was entitled to be compensated for that delay. The Court directed compensation measured by reference to the statutory rate.
Significance: Once widely cited for an "interest-on-interest" proposition, Sandvik Asia has since been expressly confined to its extraordinary facts by the larger Bench in CIT v. Gujarat Fluoro Chemicals (2014) 358 ITR 291 (SC), which held that it awarded compensation for egregious delay and did not create a general entitlement to interest on interest under section 244A. It must now be read subject to Gujarat Fluoro Chemicals.
4. Interest on refund of self-assessment tax (clause (b)/(aa))
On the start date for interest on a refund of self-assessment tax the Delhi High Court has been divided (Engineers India Ltd. one way, Sutlej Industries Ltd. the other) and the conflict was referred to a Full Bench; practitioners should verify the current position before computing such interest.
Stock Holding Corporation of India Ltd. v. N. C. Tewari, CIT (2014) 373 ITR 282 (Bombay)
Court: High Court of Bombay; judgment dated 17 November 2014 (2014) 373 ITR 282.
Held: Interest under section 244A is payable on a refund of self-assessment tax paid under section 140A. Section 244A(1)(b) is wide enough to cover such a refund: the Revenue must pay interest on the amount refunded from the date on which the tax was paid to the date the refund is granted. The CIT's order denying interest was set aside.
Significance: A leading High Court authority that self-assessment tax refunds carry section 244A interest under the residuary clause (b); read with clause (aa) inserted later, which expressly provides interest on section 140A tax.
CIT v. Birla Corporation Ltd. (Calcutta High Court) — section 244A(1)(b)
Court: High Court of Calcutta.
Held: Section 244A(1)(b) is a residuary provision under which interest on a refund of excess self-assessment tax is payable to the assessee; such interest runs from the date of payment of the tax to the date the refund is granted.
Significance: Supports the Stock Holding line that refunds of self-assessment tax attract interest under the residuary clause (b) of section 244A.
CIT v. Cholamandalam Investment & Finance Co. Ltd. (2007) 294 ITR 438 (Madras)
Court: High Court of Madras (2007) 294 ITR 438.
Held: Interest under section 244A is payable on a refund of excess self-assessment tax under the residuary clause (b), computed from the date of payment of the tax to the date the refund is granted; there is no warrant to exclude self-assessment tax from the expression refund of any amount.
Significance: One of the High Court decisions establishing the assessee's entitlement to section 244A interest on self-assessment-tax refunds, later reinforced by the insertion of clause (aa).
5. The section 244A(2) exclusion — only delay attributable to the assessee
CIT v. Larsen & Toubro Ltd. (2010) 330 ITR 340 (Bombay) — section 244A(2)
Court: High Court of Bombay; judgment dated 21 June 2010 (2010) 330 ITR 340.
Held: Where the tax (there, TDS) had been deducted and deposited with the exchequer in time, section 244A(2) could not be invoked to deny interest merely because the TDS certificates were furnished during the assessment proceedings rather than with the return; that did not amount to a delay "attributable to the assessee". Interest under section 244A(1) was therefore payable in full.
Significance: Illustrates the narrow compass of the section 244A(2) exclusion: only a delay genuinely attributable to the assessee is excluded, and the Revenue must point to such attributable delay (and, ordinarily, record a finding to that effect).
Ajanta Manufacturing Ltd. v. DCIT (2017) 391 ITR 33 (Gujarat) — section 244A(2)
Court: High Court of Gujarat (2017) 391 ITR 33.
Held: Revising a claim during the assessment proceedings is not, by itself, a delay attributable to the assessee within section 244A(2); the Revenue cannot deny interest on that basis. The exclusion in sub-section (2) is confined to delay genuinely caused by the assessee.
Significance: Reinforces the narrow reading of the section 244A(2) exclusion, alongside Larsen & Toubro.
6. Refund of interest paid under sections 234A-C attracts section 244A; section 245D(4) engages section 240
K. Lakshmanya & Co. v. CIT (2017) 399 ITR 657 (SC)
Court: Supreme Court of India; (2017) 399 ITR 657 / 248 Taxman 99.
Held: (i) An order of the Settlement Commission under section 245D(4) is an order passed in "other proceeding under this Act", so that a refund flowing from it falls within section 240. (ii) The words "refund of any amount" in section 240 are of wide import and include a refund of any amount of whatever character, including interest earlier paid under sections 234A to 234C. (iii) Where, consequent on a waiver of interest under sections 234A-234C by the Settlement Commission, interest already paid becomes refundable, that refund carries statutory interest under section 244A(1)(b) — the case being one of refund of interest paid, not of interest on interest. Section 244A is wider than the former section 244, it being sufficient that any amount of refund becomes due.
Significance: Settles that refundable interest (paid under sections 234A-C) is itself an "amount" that attracts section 244A interest, and that section 245D(4) orders engage section 240; it carefully distinguishes the impermissible interest-on-interest of Gujarat Fluoro Chemicals.
7. A refund is a debt; interest on recomputation refunds and refunds to non-residents
PCIT v. Punjab & Sind Bank (2022) 145 taxmann.com 31 (Delhi)
Court: High Court of Delhi (2022) 145 taxmann.com 31.
Held: A sum directed to be refunded to the assessee is a debt owed by the Department, and interest is liable to be paid on it under section 244A(1)(b); where excess tax (there, on re-computation) is refundable, interest runs from the date of payment to the date of grant of refund. The clause (b) residuary limb applies to refunds not falling within clauses (a)/(aa).
Significance: Confirms that a refund is a debt carrying interest and that section 244A(1)(b) is the residuary charging limb for interest on refunds, including refunds arising on re-computation.
CIT v. Punjab Chemical & Crop Protection Ltd. (2015) 231 Taxman 312 (Punjab & Haryana)
Court: High Court of Punjab & Haryana (2015) 231 Taxman 312.
Held: The assessee is entitled to interest under section 244A on a refund of excess self-assessment tax, the High Courts (Bombay, Delhi, Madras, Karnataka and Punjab & Haryana) having taken the consistent view that such refunds fall within section 244A.
Significance: Part of the settled High Court line that self-assessment-tax refunds carry section 244A interest.
DIT v. Credit Agricole Indosuez (Bombay High Court) — interest on refund to a non-resident
Court: High Court of Bombay.
Held: Interest on an income-tax refund received by a non-resident is taxable, but is not effectively connected with the permanent establishment; on the refund-interest entitlement, a non-resident is equally entitled to interest under section 244A on amounts refundable to it.
Significance: Confirms that section 244A interest is available on refunds due to non-residents; relevant to cross-border refund computations.
8. Tribunal (ITAT) authorities — deductor refunds, self-assessment-tax interest, additional interest, taxability and timing
Reliance Infrastructure Ltd. v. DDIT (ITAT Mumbai, ITA No. 7509/Mum/2010, dated 28 January 2011) — ITAT
Forum: Income-tax Appellate Tribunal, Mumbai D Bench (J. Sudhakar Reddy, AM and V. Durga Rao, JM).
Held: Interest under section 244A(1)(b) is allowable and must be granted on a refund of tax paid in pursuance of an order under section 201 (deductor held in default and tax paid, then found refundable on the matter being set aside). The Tribunal followed the Supreme Court in ITO v. Delhi Development Authority (2001) 252 ITR 772 and earlier Tribunal orders (including Tata Chemicals Ltd. v. DCIT (2007) 16 SOT 481 (Mum)).
Significance: A Tribunal authority extending section 244A(1)(b) interest to refunds of TDS paid under a section 201 order; consistent with the later Supreme Court decision in Union of India v. Tata Chemicals Ltd.
Tata Chemicals Ltd. v. DCIT (2007) 16 SOT 481 (Mumbai) — ITAT (precursor to the Supreme Court decision)
Forum: Income-tax Appellate Tribunal, Mumbai.
Held: A deductor who has deducted and deposited tax under section 195 and is later found to have over-deposited is entitled, on refund, to interest under section 244A; the amount over-retained by the Revenue carries interest as a refund due under the Act.
Significance: The Tribunal-stage decision on the deductor's refund-interest entitlement, the principle of which was subsequently affirmed by the Supreme Court in Union of India v. Tata Chemicals Ltd. (2014) 363 ITR 658 (SC).
Maruti Suzuki India Ltd. v. CIT (2020) 119 taxmann.com 40 (Delhi)(Trib.) — ITAT
Forum: Income-tax Appellate Tribunal, Delhi (ITA Nos. 2553 and 2641 (Delhi) of 2013 and others); order dated 31 August 2020.
Held: Interest is payable on a refund arising out of payment of self-assessment tax under section 140A even though the refund is less than ten per cent of the tax determined. Self-assessment tax is not part of the prepaid taxes (TDS and advance tax) governed by clause (a); it falls under the residuary clause (b) of section 244A(1), to which the ten-per-cent embargo in the proviso to clause (a) does not apply. Whenever the assessee is entitled to a refund there is a statutory liability on the Revenue to pay interest on sums wrongfully retained.
Significance: A Tribunal authority confirming that the ten-per-cent threshold does not bar interest on self-assessment-tax refunds (which fall under clause (b)); complements the Stock Holding/Cholamandalam High Court line.
Jethiben K. Patel (Discretionary Trust) v. DCIT (ITAT Ahmedabad, 2024) — section 244A(1A)
Forum: Income-tax Appellate Tribunal, Ahmedabad; reported as 2024 TAXSCAN (ITAT) 1072 (A.Y. 1992-93).
Held: Additional interest under section 244A(1A) (the further three per cent per annum where a refund on giving effect to an appellate/revision order is delayed) is available on a delayed refund; the additional-interest provision, inserted by the Finance Act, 2016, operates prospectively from 1 June 2016, so it applies to the period of delay falling on or after that date.
Significance: A Tribunal authority on the scope and effective date of the section 244A(1A) additional interest, confirming both the entitlement and its prospective (1 June 2016) operation.
Avada Trading Co. (P) Ltd. v. ACIT (2006) 100 ITD 131 (Mumbai)(SB) — ITAT, Special Bench
Forum: Income-tax Appellate Tribunal, Mumbai (Special Bench).
Held: Interest received under section 244A is chargeable to tax as income (under the head Income from other sources) in the year of its receipt; it does not await the framing of the regular assessment. Further, where interest under section 244A is subsequently reduced (for example, on appeal under section 244A(3)), the consequent withdrawal/recomputation can be given effect by rectification under section 154, the matter being one that falls within that section.
Significance: The leading Tribunal authority on the taxability and timing of section 244A interest, and on the use of section 154 to correct interest that is later varied; routinely applied by Benches dealing with refund-interest assessments.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the local Act (base text amended up to the Finance Act, 2025); the publisher's footnote apparatus and amendment-marker brackets have been removed, and three asterisks (***) denote words or a sub-section omitted by amendment and retained only to mark the omission. Finance Act, 2026 changes are flagged in the commentary. Citations are stated as reported. Where a section has not been the subject of a direct reported decision, that is stated candidly and the nearest governing authority or circular is given. This digest is for professional reference and is not legal advice.