Do you see interest charged under section 234D where your income has been assessed by the IT Department? Here’s a quick look on what Section 234D is about.
- Section 234D charges interest on excess refund given to you.
- Section 234D is attracted when refund is granted under section 143(1) but no refund is due at the time of regular assessment – (situation 1)
- Or where refund is granted under section 143(1) but it exceeds amount refundable on regular assessment. (situation 2)
In simple words, department charges you interest, if excess refund was paid to you. This happens where either no refund was due or where a lower refund had to be paid.
Here is how the interest is calculated –
- Interest is charged @ 0.5%
- The interest is charged from date of grant of refund under section 143(1) to the date of regular assessment.
- The amount, on which interest is charged, in case of situation 1, will be the entire refund amount. In case of situation 2 will be the amount of excess refund.