Tax refunds interest cut to 6%

New Delhi: The finance ministry has cut the interest rate on tax refunds to 6 per cent per year from the existing 8 per cent.

This means it may now not be profitable for corporate treasurers to deploy surplus cash by way of making liberal advance tax payments in the hope of obtaining a high return through subsequent refunds.

Simultaneously, the government has also reduced the interest chargeable by assessees on the overdues. The interest on such overdue amounts will be charged at 12 per cent against 15 per cent.

The new rates, effective from September 8, have been applicable following the promulgation of the Taxation Laws (Amendment) Ordinance, 2003, amending the concerned provisions of the Income Tax Act, the Wealth Tax Act and the Expenditure Tax Act.

The ordinance has also inserted a new Section 10BA in the I-T Act to provide for a deduction of 100 per cent of the profits derived from export of wood-based handicraft items. It has also included shipbreaking in the exempted category for the purpose of Section 10(15)(iv) in respect of interest payable outside India.