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Not every delayed income tax refund earns interest. Eligibility and the amount depend on what tax was paid in excess, whether you filed your return by its due date, the statutory threshold for the relevant category, and when the refund was granted. For many qualifying refunds, the rate is simple interest of 0.5% for each month or part of a month—but the applicable Act and its date rules matter.
Which income tax law applies to your refund?
The applicable section depends on the tax year and the proceeding, not just the date you received or expect to receive a refund. Section 244A of the Income-tax Act, 1961 governs refunds in its scope. The Income-tax Act, 2025 commenced on 1 April 2026 and provides a corresponding rule in section 437. Section 536 repeals and saves parts of the 1961 Act, including provisions for proceedings relating to tax years beginning before 1 April 2026, and addresses interest when a refund in such a proceeding falls due after commencement. Check the tax year and the section cited in your official intimation or order before applying a rule. Read section 536 of the Income-tax Act, 2025.
When does a refund earn interest?
Under section 244A of the 1961 Act, qualifying refunds carry simple interest at 0.5% for every month or part of a month. Section 437 of the 2025 Act also sets a rate of 0.5% for every month or part of a month. The provisions do not make every delayed refund automatically interest-bearing: the payment source, filing date, threshold where applicable, and statutory period all affect the result. See section 244A of the Income-tax Act, 1961 and section 437 of the Income-tax Act, 2025.
How the source of the excess payment affects the period
Identify which category produced the refund. The start date differs by category, and the rules are not interchangeable.
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| Refund source | General start date under the 1961 Act | 10% threshold |
|---|---|---|
| TDS, TCS, advance tax, or tax treated as paid | If the return was filed by its due date, 1 April of the assessment year; if filed late, the return-filing date. | Applies under section 244A(1)(a): no interest if the refund is less than 10% of tax determined under section 143(1) or on regular assessment. |
| Self-assessment tax | The later of the return-filing date or the date the tax was paid. | Applies under section 244A(1)(aa): no interest if the refund is less than 10% of tax determined under section 143(1) or on regular assessment. |
| Other excess payment against a demand | The date or dates the excess tax or penalty was paid. | The stated 10% condition for clauses (a) and (aa) does not apply identically to this residual category. |
Section 437 of the 2025 Act uses corresponding categories: for timely filing, the relevant period for TDS/TCS, advance tax, or tax treated as paid begins on 1 April of the year following the tax year; for a late return it begins on the filing date. For self-assessment tax, it uses the later of the filing date or payment date. Its stated 10% condition applies to its first two categories. The residual category is tied to payment in excess of a demand. Confirm the applicable statutory wording for your case rather than transferring a date from one Act to another. Section 244A · Section 437.
How to estimate interest
A basic framework is: eligible refund principal, after applicable statutory rounding, multiplied by 0.5%, multiplied by the number of eligible months or parts of a month. The result is only an estimate: the eligible principal, start date, end date, threshold, and governing Act must all be determined first.
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The Income Tax Department’s explanation of Rule 119A says that a fraction of a month counts as a whole month where the statute calculates interest for each month or part of a month. It also says fractional hundreds are ignored when rounding the amount on which interest is calculated. The explanation’s worked example concerns section 234D, so do not treat it as a personalized calculation of a section 244A or 437 refund. See the Department’s explanation of Rule 119A.
Why might no interest appear on your refund?
- The refund is below the applicable threshold: For the specified advance-tax/TDS/TCS and self-assessment categories, the relevant provisions deny interest when the refund is less than 10% of tax determined. The wording is “less than,” not “10% or less.”
- Your payment category has a later start date: Self-assessment tax, a late-filed return, and excess payment against a demand each have different period rules.
- The statutory interest period may be shorter than expected: Interest is calculated from the applicable statutory start date to the refund grant date, not simply from the date you first expected a refund.
- A different Act or transition rule may govern: A refund processed after 1 April 2026 does not by itself establish that section 437 applies; the tax year and saved proceeding rules matter.
- The official computation may reflect case-specific details: Compare the interest calculation and dates in the intimation or order with your return and payment records.
What to check in your records
- Note the relevant assessment year or tax year and identify whether the 1961 Act or the 2025 Act provisions apply to the proceeding.
- Classify the excess payment as TDS/TCS, advance tax, self-assessment tax, or tax or penalty paid against a demand.
- Confirm the applicable return due date and the date your return was actually filed.
- Find the payment date or dates in your challans and other tax-payment records, and note when the refund was granted.
- For a category subject to the 10% condition, compare the refund with the tax determined under the relevant provision.
- Inspect the official intimation or order for the interest amount, period, and statutory section. If dates or figures appear inconsistent, seek qualified tax advice based on your records.
The Income Tax Department says a refund claim requires filing an income-tax return. That requirement does not mean filing alone guarantees interest; the statutory conditions still apply. See the Department’s return-of-income guidance.
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A separate additional-interest rule is not a routine delay payment
Section 437(4) of the 2025 Act provides for additional interest at 3% per annum in qualifying circumstances involving implementation of an order. It is a distinct statutory situation, not an extra rate that applies to an ordinary delayed ITR refund. Check the provision and the facts of the order before relying on it. Read section 437 of the Income-tax Act, 2025.
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