However, The simple interest is earned on the refund if the refund amount is at least 10% of the actual tax liability before tax deducted at source (TDS) as determined under regular assessment. The rate of simple interest is 6% per annum or 0.5% per month.
Further more, in case the assessee claims a very high amount of tax refund, the department may select the income return for scrutiny assessment. In case of any doubt, after intimating the assessee in writing, the department may set off any tax demand remaining payable against the amount to be refunded. Interest income on income tax refunds