It has been nearly two months since the September 16 ITR filing deadline passed. While , a section of filers is still refreshing their bank apps and the income tax portal, waiting to see when — or if — their money will arrive.
For those in this queue, one big question remains: does the government pay interest on delayed tax refunds, and if yes, how much?
To get clarity, India Today spoke to CA (Dr) Suresh Surana, who breaks down the rules for compensation when refunds are delayed and how much taxpayers can expect in interest.
According to Suresh Surana, the interest payable on delayed refunds is clearly laid out under the law. “As per Section 244A of the Income Tax Act, 1961, where refund of any amount becomes due to the assessee, he shall be entitled to receive simple interest at the rate of 0.5% for every month or part of the month,” he explains.
This means, if your refund has been delayed by the tax authorities, you could earn 6% interest per year — calculated monthly, on a simple interest basis. Unlike compound interest, the amount does not grow on previously earned interest.
Surana explains it with a quick calculation. “If a taxpayer is due a refund of Rs 20,000 and there’s a delay of three months, the interest would be Rs 20,000 0.5% 3 = Rs 300,” he explains.
So, while the interest does kick in, it remains modest and proportional to the delay period.
Not all refund delays qualify for interest. The key factor is responsibility — was the delay caused by the department, or the taxpayer?
“No interest is payable if the delay is attributable to the taxpayer — for instance, due to incomplete or incorrect information or delayed responses to tax notices,” Surana says.
“Similarly, no interest is granted on refunds arising out of self-assessment tax under Section 140A if the refund amount results solely from excess payment of such tax. Further, in cases where the refund amount is less than Rs. 100, the law expressly disallows payment of interest,” he says.
The Central Board of Direct Taxes (CBDT) has also strengthened refund processing rules. “CBDT Notification No.155/2025 empowers the CPC in Bengaluru to correct refund-related mistakes under Section 154 and adjust refunds against outstanding demand,” Surana points out.
Good news — the rule applies across the board. Whether you are salaried, a freelancer, a business owner, a Hindu Undivided Family (HUF), or even a company, the same interest provision stands.
As long as excess tax has been paid — through TDS, advance tax or self-assessment — and the delay is not your fault, you qualify.
The most common culprit? Mismatches. Even small differences between details in your tax return and government records like Form 26AS, AIS or , the CA explained.
Other reasons include bank accounts not being pre-validated, PAN not linked to Aadhaar, pending scrutiny, outstanding tax demand, or technical delays during peak filing months.
The first step is to log into the income tax e-filing portal and check your refund status. Make sure all your tax credits are reflected, and your bank account is linked and validated.
If the amount is incorrect or interest has not been added, you can file an online rectification request under Section 154. Another option is to raise a complaint on the e-Nivaran portal or contact the Centralised Processing Centre (CPC) in Bengaluru directly, Surana said.
Simply put, A delayed refund is frustrating, but the law ensures you are compensated — as long as the delay is not your doing. The interest won’t be a windfall, but it does ensure the government pays a price for holding onto your money.