For many taxpayers, an income tax refund delayed beyond the usual processing time can be stressful. With nearly two months since the September 16 ITR filing deadline, a large number of taxpayers have received their refunds, but many are still checking their bank statements and the Income Tax portal for updates. The good news is that if your income tax refund is delayed, the government pays interest on the pending amount. However, the rules, exceptions, and eligibility criteria are often misunderstood.
To clarify how interest is calculated on delayed refunds, breaks down the provisions under Section 244A and what taxpayers should expect when the refund doesn’t arrive on time.
How Interest on a Income Tax Refund Delayed Is Calculated
If your income tax refund is delayed, the law ensures compensation. Under Section 244A of the Income Tax Act, taxpayers are entitled to simple interest at 0.5% per month, equivalent to 6% per annum. The interest is calculated monthly, and even a part of a month is counted as a full month for calculation.
Since the interest is simple interest, it is computed only on the refund amount and not on previously earned interest.
For example, if a taxpayer is due a refund of ₹20,000 and there is a delay of three months, the interest would be:
₹20,000 × 0.5% × 3 = ₹300
While the compensation is modest, it ensures that taxpayers are not left without recourse when refunds are delayed due to system or departmental issues.
Situations Where You Will Not Receive Interest on a Income Tax Refund Delayed
Not all delays qualify for interest. If the delay in your income tax refund delayed status is caused by the taxpayer, the department is not liable to pay interest. Common reasons include incomplete information in the ITR, mismatches in Form 26AS or AIS, or failure to respond to notices.
Additionally:
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No interest is payable on refunds arising purely from excess self-assessment tax paid under Section 140A.
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If your refund amount is less than ₹100, the law does not allow interest payments.
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CBDT Notification No. 155/2025 allows CPC Bengaluru to correct refund-related issues and adjust refunds against outstanding tax demands, which can also affect interest eligibility.
Eligibility for Interest on Income Tax Refund Delayed
The benefit of interest on a delayed tax refund is not limited to any single category. Salaried individuals, freelancers, businesses, HUFs, and companies are all eligible. As long as you have paid excess tax—whether through TDS, advance tax, or self-assessment tax—and the delay is not your fault, you qualify for interest under Section 244A.
Why Income Tax Refund Delayed
A primary reason for an income tax refund delayed status is mismatches in tax credit data. Even small inconsistencies between your ITR, Form 26AS, AIS, or TIS can lead to manual processing and delay. Other reasons include unvalidated bank accounts, PAN-Aadhaar issues, pending scrutiny notices, old outstanding demands, and seasonal processing backlogs during peak filing months.
What To Do If Your Refund or Interest Amount Is Missing
If your refund is delayed or the interest has not been credited, you can follow a few important steps:
First, log in to the Income Tax e-filing portal and check your refund status. Ensure that your bank account is pre-validated and all tax credits are correctly reflected. If your refund failed due to banking issues, apply for a Refund Re-Issue.
If the refund amount is incorrect, or interest has not been credited despite a clear delay, file an online rectification request under Section 154. You may also raise a ticket via the e-Nivaran portal or contact the Centralised Processing Centre (CPC) in Bengaluru.
Ultimately, while a delayed refund can be frustrating, the law provides protection through interest payments—provided the delay is not due to errors on the taxpayer’s part. Though the compensation may not be substantial, it ensures accountability when tax refunds do not arrive on time.
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