Income Tax Act: The Income Tax Act, 2025, will come into effect on April 1st of next year. It replaces the Income Tax Act, 1961. The government has attempted to simplify income tax rules in the new Act. Taxpayers will have no difficulty understanding the language of the new Act. Experts say that the government has not made any fundamental changes to tax rules in the new Act. The question is, what are the rules for income tax refunds under the new Act?
Sections 431 to 438 contain rules for refunds.
The Income Tax Act , 2025 , has separate sections for tax refunds. Sections 431 to 438 contain the rules for refunds. Sections 237 to 245 of the Income Tax Act, 1961, contained the rules for refunds. The new refund sections explain when a taxpayer is entitled to a refund, when the refund will be paid, and how interest on the refund will be calculated.
Section 433 of the Income Tax Act, 2025, states that a refund claim must be submitted through an income tax return. Section 431 states that a taxpayer is entitled to a refund if their total tax payment exceeds their tax liability for that financial year. The tax paid includes TDS, advance tax, or self-assessment tax.
Provision of interest on delay in refund payment
The Income Tax Act, 2025, provides for interest on refunds. Interest will only be paid to taxpayers if a refund is delayed. Section 437(1) states that interest will be paid at a rate of 0.5 percent per month on the refund amount. Experts say that the new Income Tax Act does not make any fundamental changes to the refund rules. The interest rate on refunds remains at 0.5 percent per month.
Section 244A of the Income Tax Act, 1961, provides for provisions related to delayed tax refunds. It states that the Income Tax Department will pay taxpayers simple interest at a rate of 0.5% per month (6% per annum) for delayed refunds. The new Act has attempted to simplify the language.