Refunds, e-verification, notices and corrections · Tax Year 2025-26
Interest on income tax refund: section 244A
If the department refunds tax you overpaid, it adds interest at 0.5% per month under section 244A, unless the refund is small. Learn how the interest is counted, when none is paid, a worked example and whether it is taxable.
On this page
When the department refunds more tax than you owe, it pays you interest under section 244A at 0.5% per month on the refund of TDS, TCS and advance tax. There is no interest if the refund is less than 10% of the tax determined. For a return filed on time, interest runs from 1 April after the tax year. For a return filed late, it runs from the date of filing.
The rule and rate are those of the Income-tax Act, 1961, as TaxCare's rules carry them for the tax year 2025-26. Under the Income-tax Act, 2025, interest on refunds is section 437, at the same 0.5% per month or part of a month, with the same 10% minimum.
The rule in a table
Question | Answer on 2025-26 rules |
|---|---|
Rate | 0.5% per month or part of a month |
On what | Refund of TDS, TCS and advance tax |
Minimum refund for interest | Refund must be at least 10% of the tax determined |
Start date, return on time | 1 April after the tax year |
Start date, return filed late | The date the return was filed |
End date | The date the refund is granted |
Where the refund comes out of self-assessment tax you paid, interest runs at the same rate but from the date you filed the return or paid the tax, whichever is later. Any period of delay caused by you is left out of the interest period.
Worked example
You file on time for the tax year 2025-26 and your return shows:
- Tax determined: ₹40,000
- TDS and advance tax paid: ₹90,000
- Refund due: ₹50,000
Refund of ₹50,000 is more than 10% of the tax determined (₹4,000), so interest is payable.
Suppose the refund is granted in September 2026. The months counted from April to September are 6. Interest is ₹50,000 × 0.5% × 6 = ₹1,500.
A part of a month counts as a full month, so April and September are both counted. TaxCare's estimate counts months the same way.
Why you might get no interest
- The refund is small compared with your tax. For example, tax determined ₹1,00,000 and refund ₹8,000: 10% of the tax is ₹10,000, so no interest.
- Your return was filed late and the refund was granted soon after filing, so few months are counted.
Rounding
The department rounds the refund amount to the nearest ₹10 under section 288B, and the interest is added on top. TaxCare's estimate is shown to the filing date only. The actual figure is worked out by the department up to the date of grant.
Is it taxable?
Yes. Interest on an income tax refund is taxed as income from other sources; the ITR forms list "interest from income tax refund" under that head. Check your AIS for the amount.
How to get the refund faster
- Make sure your return is e-verified within 30 days. Without it there is no processing and no refund.
- Pre-validate your bank account on the portal (Profile, then My Bank Account, then Add Bank Account) and nominate it for refund. The account must be linked to your PAN. Validation is done with your bank and the status updates in about 10 to 12 working days.
- Check your return against the AIS and Form 26AS or Form 168, so the department does not adjust the refund.
- Follow up through the portal if the refund is delayed. See income tax refund status and delays.
If the refund is lower than you expected
Compare your return with the intimation. See what is intimation under section 143(1). Differences often come from TDS credit that did not match, an adjustment of an earlier demand, or income found in your AIS. Before a refund is set off against an earlier demand, the department must tell you in writing (section 245), and you can respond on the portal, saying whether you agree with the demand.
How TaxCare helps
TaxCare shows an estimate of the section 244A interest alongside the refund in your computation, so you know what to expect, and follows your return through filed, verified, processed and refund issued. Alerts reach you when the refund is credited. The department's own figure is the final one.
This guide gives general information and is not professional tax advice.
Questions on this topic
How much interest is paid on an income tax refund?
On the 2025-26 rules, 0.5% per month, or part of a month, on the refund of TDS, TCS and advance tax.
Is interest paid on every refund?
No. No interest is paid where the refund is less than 10% of the tax determined.
From when is interest counted?
For a return filed on time, from 1 April after the tax year until the refund is granted. For a late return, from the date the return was filed.
Is the interest taxable?
Yes. Interest on an income tax refund is taxed as income from other sources, and the ITR forms list it under that head.
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