Section 234D of Income Tax Act for AY 2023-24

Section 234D of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Interest on excess refund.

Amended and updated notes on section 234D of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to Interest on excess refund.

Chapter XVII (Sections 190 to 234G) of the Income Tax Act 1961 deals with the provisions related to collection and recovery of tax. Section 234C of IT Act 1961 provides for Interest on excess refund.

Recently, we have discussed in detail section 234C (Interest for deferment of advance tax) of IT Act 1961. Today, we learn the provisions of section 234D of Income-tax Act 1961. The amended provision of section 234D is effective for financial year 2020-21 relevant to the assessment year 2021-22.

In this article, you will learn detail of the provisions of section 234D of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962 as provided by Ministry of Law and Justice, Government of India.

Section-234D: Interest on excess refund

Section 234D(1) of Income Tax Act

Subject to the other provisions of this Act, where any refund is granted to the assessee under sub-section (1) of section 143, and—

  • (a) no refund is due on regular assessment; or
  • (b) the amount refunded under sub-section (1) of section 143 exceeds the amount refundable on regular assessment,

the assessee shall be liable to pay simple interest at the rate of one-half per cent on the whole or the excess amount so refunded, for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment.

Section 234D(2) of Income Tax Act

Where, as a result of an order under 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 of refund granted under sub-section (1) of section 143 is held to be correctly allowed, either in whole or in part, as the case may be, then, the interest chargeable, if any, under sub-section (1) shall be reduced accordingly.

Explanation-1: Where, in relation to an assessment year, an assessment is made for the first time under section 147 or section 153A, the assessment so made shall be regarded as a regular assessment for the purposes of this section.

Explanation-2: For the removal of doubts, it is hereby declared that the provisions of this section shall also apply to an assessment year commencing before the 1st day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date.

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