The Hindu Business Line : Interest cut on I-T refunds

Tax-payers who have to cope with the proposed reduction in tax rebate available under Section 88 of the Income-Tax Act 1961 on contributions to small savings products will also have to contend with a lower interest on refunds.

The Finance Bill 2002 has proposed a reduction in the interest payable to assessees on refunds, from nine per cent to eight per cent.

The policy of moving towards a softer interest rate regime is being cited as the main reason for the proposed one percentage point cut in interest on refunds.

The administered interest rates on a host of small savings products have already been reduced by 50 basis points, following the Finance Minister's Budget announcement.

There has, however, been no change in the 15 per cent penal interest rate charged from the assessee. Besides individual assessees, corporates paying advance tax too will be hit by the proposed lowering of interest rates from three-fourths of a percentage point to two-thirds of a percentage point for every month or part of the month and from nine per cent to eight per cent as the case may be.

Earlier, several corporates found it more lucrative to pay higher advance taxes and subsequently claim refunds since interest rates were attractive.

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