Filing ITR late? You can earn 33% more interest on tax refunds this year
The Income Tax Department has extended the last date for filing Income Tax Returns (ITR) for the financial year 2024–25. Instead of the usual July 31 deadline, taxpayers now have time until September 15, 2025. While this comes as a relief for many, it also means that people expecting refunds may get more money, thanks to the interest paid by the tax department.advertisementWHY THE REFUND AMOUNT MAY BE HIGHERIf you've paid more tax—through TDS, advance tax, or self-assessment—than your actual tax liability, you're eligible for a refund. Under Section 244A of the Income Tax Act, the IT Department pays 0.5% interest per month on any excess tax collected.This interest starts from April 1 of the assessment year and continues until your refund is issued. Since the ITR deadline has been pushed by 1.5 months, and if your refund is processed in October, you'll end up getting interest for two extra months.
According to CA (Dr) Suresh Surana, 'With the ITR filing deadline for FY 2024-25 (AY 2025-26) now extended to 15 September 2025, taxpayers may see an increase in refund of about 33% in the interest amount received on their tax refunds provided the returns are filed by September 15, 2025 and the corresponding refunds are assumed to be processed in October 2025.'advertisementHe added, 'This is because Section 244A allows for simple interest at 0.5% per month (6% annually) on refunds. The additional 1.5 months between the usual deadline of July 31 and the revised deadline of September 15 increases the interest accrual period. If the refund is processed in October, the interest component alone could rise by about 33% (i.e. interest would accrue for an additional 2 months) compared to a typical year. If the processing is delayed beyond October, the interest may increase even further.'BUT REMEMBER - THIS EXTRA INTEREST IS TAXABLEIt's important to note that the interest you receive on your tax refund is taxable under 'Income from Other Sources' and must be reported in your ITR.Additionally, from FY 2025–26, the revised Section 87A rebate ensures that salaried individuals earning up to Rs. 12.75 lakh and non-salaried individuals up to Rs. 12 lakh will have no tax liability under the new regime. This may help cushion the tax impact of the additional interest received,' noted Surana.DON'T DELAY FILING JUST TO EARN MORE INTERESTDespite the appeal of a bigger refund, experts warn against using the interest benefit as a reason to delay filing your return. 'While higher interest on refunds may appear attractive, it is still capped at 6% per annum,' said CA Surana.Nonetheless, filing your return early means it's processed sooner, your refund arrives quicker, and you can put that money to better use elsewhere.Must Watch
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