For a qualifying income-tax refund under Section 244A of India’s Income-tax Act, 1961, the usual entitlement is simple interest at 0.5% for every month or part of a month. The interest period is not the same for every taxpayer: it depends on whether the refund arose from advance tax, tax deducted or collected and treated as paid, self-assessment tax, or payment against a demand.
Two limits are especially important. First, the 10% minimum-refund condition applies only to specified advance-tax, tax-treated-as-paid and tax-collected-at-source categories; it is not a blanket rule for every refund. Second, a period of delay attributable to the assessee or deductor is left out. Refunds resulting from certain appellate or other specified orders can also qualify for additional interest at 3% a year. For tax years governed by the Income-tax Act, 2025, the corresponding provision is Section 437 rather than Section 244A.
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Which provision applies: Section 244A or Section 437?
Section 244A under the 1961 Act
Section 244A is the refund-interest provision in the Income-tax Act, 1961, as amended by the Finance Act, 2025. It covers the ordinary monthly interest rate, the start-date rules for different tax payments, the 10% threshold for specified categories, additional interest in certain order-effect cases, exclusions for taxpayer-caused delay, deductor claims and later adjustments.
Section 437 under the 2025 Act
The Income-tax Act, 2025 contains a corresponding regime in Section 437. Section 437 retains the same principal features: 0.5% for each month or part of a month, the specified 10% threshold, 3% additional interest in qualifying order-effect cases, exclusion of attributable delay, deductor provisions and adjustment of interest after a later order.
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Do not select the section number by the year in which you happen to receive money. Identify the tax year, the legislation applicable to that year and the commencement or transition rules. The 2025 Act’s section numbering and terminology differ from the 1961 Act, so a notice or calculation referring to Section 437 is not necessarily an error.
What is the refund-interest rate?
Simple interest at 0.5% per month or part-month
The ordinary statutory rate is 0.5% for every month or part of a month. “Simple” means the interest is not compounded: interest for one counted month does not become part of the principal for calculating the next month.
A part of a month counts as a month under the statutory wording. The period must therefore be counted using the legally applicable start and end dates, rather than by dividing an approximate number of days by 30. The amount on which interest is calculated is the qualifying refund for the relevant category and period.
Illustrative calculation
Suppose a qualifying refund is ₹50,000 and the statutory period contains six counted months. The illustrative calculation is ₹50,000 × 0.5% × 6, or ₹1,500. This example shows the rate mechanics only; it does not decide whether the refund qualifies, which start date applies, whether the 10% condition is met or whether any months must be excluded for attributable delay.
From which date is refund interest calculated?
The starting point is determined by the source of the refund and, for some categories, whether the return was filed by its due date.
Advance tax, tax treated as paid and tax collected at source
For a refund out of:
- advance tax;
- tax treated as paid under Section 199; or
- tax collected at source under Section 206C,
the period generally begins on 1 April of the assessment year when the return was furnished by the due date. If the return was filed late, the period generally begins on the date the return was furnished, not on 1 April.
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This rule makes the filing date material even when the underlying tax payment was made much earlier. A late return can therefore shorten the period for which interest is payable.
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Self-assessment tax paid under Section 140A
For a refund of self-assessment tax paid under Section 140A, interest generally runs from the later of the return-filing date and the date of payment. The later-date rule prevents the period from beginning before both relevant events have occurred.
Other payments against a demand
For other cases, the relevant period or periods run from the date or dates on which the tax or penalty specified in a Section 156 demand was paid in excess of that demand. Multiple payments can therefore produce more than one starting date instead of a single date for the entire refund.
Start-date comparison
| Refund source | General statutory starting point | Important condition |
|---|---|---|
| Advance tax | 1 April of the assessment year | Applies when the return was furnished by the due date; a late return generally shifts the start to the filing date. |
| Tax treated as paid under Section 199 | 1 April of the assessment year | Same timely-versus-late return distinction applies. |
| Tax collected at source under Section 206C | 1 April of the assessment year | Same timely-versus-late return distinction applies. |
| Self-assessment tax under Section 140A | The later of return-filing date and payment date | The later event controls the start. |
| Other tax or penalty paid against a Section 156 demand | Date or dates of payment in excess of the demand | Separate payments can create separate periods. |
When does the 10% minimum-refund condition remove interest?
The threshold is limited to specified categories
No interest is payable under clauses (a) and (aa) when the refund is less than 10% of the tax determined under Section 143(1) or on regular assessment. The comparison is between the refund and the tax determined in the relevant statutory determination.
The condition applies to the specified advance-tax, Section 199 tax-treated-as-paid and Section 206C tax-collected-at-source categories covered by those clauses. It should not be extended automatically to every refund, particularly the separate category dealing with self-assessment tax and other cases.
How to use the threshold
- Identify whether the refund falls within clause (a) or clause (aa), rather than assuming every Section 244A refund is tested.
- Find the tax determined under Section 143(1) or on regular assessment, as applicable.
- Calculate 10% of that determined tax.
- Compare the refund with that amount. A refund below the statutory 10% level does not earn interest for those specified categories.
For example, if the relevant determined tax is ₹200,000, 10% is ₹20,000. A refund below ₹20,000 fails the threshold for the categories to which clauses (a) and (aa) apply. The example does not establish the result for a refund governed by clause (b), because that category has a different statutory treatment.
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Can a qualifying refund receive additional interest at 3% a year?
Yes, but only in the defined order-effect situation. Section 244A(1A) provides additional interest at 3% per annum when a refund results, wholly or partly, from giving effect to specified appellate or other orders without making a fresh assessment or reassessment.
When the additional period begins
The additional-interest period begins after the expiry of the time allowed under Section 153(5) for giving effect to the order. It is therefore tied to the statutory implementation deadline, not simply to the date on which the appellate or other order was issued.
Withholding while proceedings are pending
The provision excludes the specified period during which the refund is withheld while assessment or reassessment proceedings are pending. That withheld period cannot be treated as an ordinary delay attracting the additional 3% rate.
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What happens when the taxpayer or deductor caused part of the delay?
If the proceedings that produced the refund were delayed for reasons attributable to the assessee or deductor, that attributable period is excluded from the period for which interest is payable. The exclusion can reduce the number of counted months even where the final refund itself is otherwise due.
Determining the excluded period
A dispute about the period to be excluded is assigned to the specified senior tax authority. The statute makes that authority’s decision final. Keep the correspondence, submissions, missed deadlines and dates of compliance that bear on responsibility for the delay, because the legal question is who caused which portion of the delay, not merely how long the department’s file remained open.
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What is not established by the rule
The rule does not say that every administrative delay is attributable to the taxpayer or deductor. Only the period delayed for reasons attributable to them is excluded. A calculation should identify the specific interval and reason rather than remove the entire processing period automatically.
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Special rule for deductors seeking a refund
A deductor entitled to a refund of tax paid to the Central Government under Chapter XVII-B may receive interest at 0.5% for every month or part of a month.
Possible starting points
Depending on the circumstances, the period can begin when the prescribed refund claim is made or when tax is paid in a refund resulting from specified orders. The correct starting point therefore depends on the statutory route used for the deductor’s claim and the event that produced the refund.
The same practical cautions apply: identify the applicable provision, establish the relevant dates, and remove any period attributable to the deductor where the statute requires it.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What if a later order changes the refund or interest?
If a subsequent order changes the amount on which interest was payable, the interest is increased or reduced accordingly. The original calculation is not necessarily final merely because the refund has already been issued.
Interest increased
Where the later order establishes a larger eligible refund or a longer eligible period, the statutory adjustment can increase the interest due.
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Interest reduced
Where the later order reduces the interest that was payable, the Assessing Officer may issue a demand for excess interest already paid, using the process described in the provision. A refund recipient should therefore retain the order, calculation sheet and payment records until the assessment position is settled.
How to work out your own Section 244A position
- Identify the governing Act and year. Confirm whether the calculation is under Section 244A of the Income-tax Act, 1961 or Section 437 of the Income-tax Act, 2025, taking account of applicable commencement and transition rules.
- Classify the refund source. Separate advance tax, Section 199 tax treated as paid, Section 206C tax collected at source, Section 140A self-assessment tax, payments against a Section 156 demand and a refund arising from a specified order.
- Record the legally relevant dates. Note the return due date, actual filing date, payment dates, demand date, dates of appellate or other orders and the Section 153(5) implementation deadline where relevant.
- Apply the category-specific start rule. Use 1 April for a timely return in the specified advance-tax and related categories, the filing date for a late return, the later filing-or-payment date for self-assessment tax, or the relevant excess-payment date for other demand cases.
- Test the 10% condition only where it belongs. Compare the refund with 10% of tax determined under Section 143(1) or on regular assessment for clauses (a) and (aa). Do not carry that test into a different category without statutory support.
- Remove attributable-delay periods. Identify any interval delayed for reasons attributable to the assessee or deductor and check how the specified senior authority resolved a dispute about it.
- Check for additional order-effect interest. If the refund follows a specified order without a fresh assessment or reassessment, determine whether the 3% additional-interest rule applies after the Section 153(5) period and whether any permitted withholding interval must be excluded.
- Reconcile later orders. Recalculate if a subsequent order changes the refund or the interest base, and respond to any formal demand for excess interest.
Worked timing examples
Timely return with advance-tax refund
A taxpayer has a refund arising from advance tax and files the return by the due date. Subject to the other statutory conditions, the ordinary period generally starts on 1 April of the assessment year. The 0.5% rate applies for each counted month or part-month through the relevant refund period, unless an excluded attributable-delay interval applies.
Late return with tax collected at source refund
A taxpayer has a refund arising from tax collected at source but files after the due date. The general start point shifts to the date the return was furnished. The fact that tax was collected earlier does not, by itself, restore a 1 April start date.
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Self-assessment tax paid after filing
If self-assessment tax is paid after the return is filed, the payment date is later. The ordinary period therefore generally begins on that later payment date. If payment preceded filing, the filing date would be the later event instead.
Refund after an appellate order
Where a specified appellate order produces a refund without a fresh assessment or reassessment, ordinary refund interest is considered under the applicable category and additional interest may arise after the Section 153(5) period. Any period in which the refund is withheld because assessment or reassessment proceedings are pending is treated according to the exclusion in the provision.
Common mistakes that produce incorrect expectations
- Using 0.5% as an annual rate: the ordinary rate is 0.5% per month or part-month, not 0.5% for an entire year.
- Counting only complete calendar months: the statute counts a month or part of a month, so partial months cannot simply be discarded.
- Starting every calculation on 1 April: that start is tied to specified categories and timely filing; late returns and other refund sources have different rules.
- Applying the 10% test to every refund: the threshold is attached to clauses (a) and (aa), not indiscriminately to clause (b) or every possible refund.
- Ignoring self-assessment payment timing: Section 140A refunds use the later of filing and payment dates.
- Treating all delay as departmental delay: periods attributable to the assessee or deductor are excluded.
- Assuming the 3% rate is universal: additional interest requires a qualifying specified order and the statutory order-effect conditions.
- Using the wrong Act’s section number: Section 244A and Section 437 correspond to different Acts; the applicable tax year and commencement rules control.
What the official guidance calls a delayed refund
The Income Tax Department’s guidance uses the heading “Delayed Refund by Department (Section 244A).” It explains that the interest period depends on the type of tax and the date on which the return was filed. That wording is useful when reading departmental communications, but the statute’s category-specific rules determine the actual entitlement.
Quick Recap
Key takeaways for a refund calculation
- The ordinary Section 244A rate is simple interest of 0.5% for every month or part-month.
- The start date depends on the refund source and, in several categories, timely versus late return filing.
- The 10% minimum-refund condition is limited to specified clauses (a) and (aa).
- Taxpayer- or deductor-attributable delay is excluded from the interest period.
- Specified order-effect refunds can carry additional interest at 3% per annum after the Section 153(5) period, subject to the statutory exclusion for permitted withholding.
- Later orders can increase or reduce interest, and reduced interest can lead to a demand for excess interest paid.
- For the 2025 Act, use the corresponding Section 437 framework and confirm which legislation governs the relevant year.
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