Maximize Your Tax Refund: Interest on ITR Delays Explained

Tax Refunds Come With Interest—Here’s How It Works Under Section 244A for FY 2024–25

If you’ve ended up paying more income tax than required—through TDS, advance tax, or self-assessment—the Income Tax Department owes you a refund. But there’s more: they also pay interest on the refund, under Section 244A of the Income Tax Act, 1961.

For the financial year 2024–25 (assessment year 2025–26), the rules remain the same, but the extended ITR deadline could mean a little extra interest for eligible taxpayers. Here's what you need to know.

Section 244A Basics: What It Offers

Section 244A ensures that taxpayers who’ve overpaid don’t just get their money back—they also receive simple interest at 0.5% per month, or 6% annually, on the amount due.

This interest applies only if the refund exceeds 10% of your total tax paid during the year. If you qualify, the interest is automatically added to the refund—no separate claim required.

A few important conditions:

• The interest is not compounded—you only get simple interest.
• Your return must be filed and verified on or before the due date (or the extended deadline, if one is announced).

What’s New This Year: A Longer Deadline = More Interest

For AY 2025–26, the deadline to file your income tax return has been extended to September 15, 2025. That gives taxpayers more time, but it also affects how interest on refunds is calculated.

Here’s why: interest on refunds is counted from April 1 of the assessment year (in this case, 2025) to the actual date the refund is issued—if you’ve filed on time.

So, if your return is processed and the refund hits your account in, say, October 2025, you may receive interest for about 6.5 months instead of the usual 5 or 5.5. This extra interest could work out to a 25–33% higher payout compared to a normal year, though the actual gain depends on your refund amount.

But Miss the Deadline, and Interest Starts Later

If you file after September 15, you lose the benefit of that early April start. In that case, interest is calculated from the date you file your return, not from April 1. That can cut down the interest payout significantly.

Don’t Forget: Interest Is Taxable

One detail many overlook: interest received on tax refunds must be reported as income under the head "Income from Other Sources" in your tax return for the year in which the refund is received.

Eligibility: When Do You Qualify for Section 244A Interest?

You’re entitled to interest on a refund under Section 244A if:

• The refund amount exceeds 10% of your total tax paid.
• Your return is filed and verified on time.
• The delay in refund is not caused by you—errors, missing documents, or incorrect details can disqualify or reduce interest.

Trend Watch: Refund Processing Is Much Faster Now

The Income Tax Department has become noticeably quicker in issuing refunds. In FY 2024–25, they disbursed ₹1.9 lakh crore in refunds to non-corporate taxpayers—up from ₹1.57 lakh crore the year before.

Thanks to improved digital systems, the average processing time has dropped to 17 days, a big improvement from over 90 days a decade ago. So while interest accrual matters, filing early is still the fastest route to seeing your refund in your account.

Why Filing Early Still Makes Sense

While the extended deadline may earn you a bit more interest, early filing still gives you:

• Quicker access to your refund
• Faster resolution of any errors
• More breathing room to revise your return if needed
• Fewer last-minute tech or portal issues

There’s no downside to filing early—and the peace of mind is often worth more than the few extra rupees in interest.

At a Glance: Section 244A in FY 2024–25

Aspect	Details
Interest Rate	0.5% per month (6% annual), simple interest
Refund Threshold	More than 10% of total tax paid
Interest Period (Timely)	April 1 (AY) to refund date
Late Filing Impact	Interest starts from actual filing date
Interest Taxable?	Yes – under “Income from Other Sources”
Avg Refund Time (FY25)	17 days

Final Word

Section 244A offers a fair return on your overpaid taxes, and this year’s longer filing window might mean a slightly better interest payout. But the smartest move remains simple: file early, file correctly, and you’ll get your refund—and any interest—sooner and with fewer complications.