Section 244 of the Income-tax Act, 1961: Interest on Refund Where No Claim Is Needed

Section 244 provided interest where a refund arose from an appeal or other order without a separate refund claim. Its historical operation must be distinguished from the modern refund-interest framework.

Meaning and purpose of Section 244

Section 240 required a refund becoming due following an appellate or other qualifying order to be made without the assessee having to file a separate claim, subject to the Act. Section 244 supplemented that entitlement with interest rules for delayed refunds and certain amounts paid under assessment or penalty orders.

Explanation of Section 244 provisions

Section 244(1): Delay after an appellate order

Where a refund was due under an order referred to in Section 240, and the Assessing Officer failed to grant it within three months from the end of the month in which that order was passed, the Central Government was required to pay simple interest at 15% per annum from immediately after that three-month period until the refund was granted. This is a historical statutory rate and is subject to Section 244(3).

Section 244(1A): Excess tax or penalty paid

Where an amount paid after 31 March 1975 pursuant to an assessment or penalty order was subsequently found excessive in an appeal or other proceeding, interest could be payable from the date of payment until refund. If payments were made in instalments, the excess component of each instalment was considered separately. The subsection excluded the first month following the appellate or other order and prevented overlapping interest under subsection (1) for the same excess amount.

Section 244(1B): Refunds due to deductors

Inserted with effect from 1 April 2017, this provision addressed interest on refunds to deductors for sums deposited under Chapter XVII-B. It prescribed simple interest at one-half per cent for each month or part of a month, beginning from the prescribed refund claim or, for specified appellate orders, from the tax payment date, until refund. Its placement within Section 244 should be read with the section's historical applicability and the separately applicable provisions of Section 244A(1B).

Section 244(2): Refund withheld under former Section 241

For refunds withheld under the former Section 241, the subsection dealt with interest on the amount ultimately found refundable, using the prescribed period following the relevant order until the date of refund. Section 241 itself was omitted with effect from 1 April 1988.

Section 244(3): Assessment year restriction

The section does not apply to assessments for the assessment year beginning on 1 April 1989 or any later assessment year. This restriction is essential when interpreting its older provisions.

Current framework for interest on income-tax refunds

For relevant assessment years governed by the Income-tax Act, 1961, Section 244A generally provides simple interest at 0.5% for each month or part of a month, with the start date, exclusions and additional interest depending on the nature of the refund. The calculation is not identical for advance tax, tax deducted or collected at source, self-assessment tax and other payments.

For the framework under the Income-tax Act, 2025, Section 437 governs interest on refunds. Its provisions include the general 0.5% monthly rate in specified circumstances and rules for additional interest on certain refunds arising from appellate orders. Transitional and savings provisions must be considered for earlier assessment years.

Illustration: Why the assessment year matters

If a taxpayer receives a refund after an appellate order relating to a modern assessment year, it would be incorrect to automatically apply Section 244's historical 15% annual rate merely because an appeal caused the refund. The applicable provision, assessment year, payment category, relevant dates and any attributable delay must first be identified.

Practical steps when refund interest is missing

• Check the relevant assessment year and the provision governing the refund.
• Review the intimation, assessment or appeal-effect order and the refund credit date.
• Compare the interest computation against Section 244A or Section 437, as applicable.
• Where a computational mistake appears, consider the appropriate rectification or grievance procedure on the official income-tax portal.
• Keep copies of tax payment records, orders, refund communications and bank credits.

Frequently asked questions

Is Section 244 applicable to current assessment years?

No. Section 244(3) excludes assessment year 1989-90 and later assessment years. Refund interest for subsequent periods is governed by the applicable later law.

Is the old 15% interest rate still generally available?

No. The 15% annual rate belongs to the historical Section 244 framework. The usual statutory rate under Section 244A and Section 437 is 0.5% per month or part of a month, subject to the relevant conditions.

Does an appellate refund always require a fresh refund claim?

Section 240 of the 1961 Act provides for refunds arising from qualifying orders without a separate claim, subject to statutory exceptions. The corresponding provision under the 2025 Act is Section 435.

Official legal references

Income Tax Department: Section 244, Income-tax Act, 1961

Income Tax Department: Income-tax Act, 1961, as amended by Finance Act, 2025 (PDF)

Income Tax Department: Income-tax Act, 2025 (PDF)

Income Tax Department: Income-tax Act, 2025 resources and transition guidance

Updated: 27 October 2026. This article provides general statutory information; case-specific entitlement depends on the applicable law and orders.