Income Tax Refund Rules: When Interest on Delayed Refunds Is Not Payable, Check Details
Delays in receiving income tax refunds are a common concern for taxpayers, especially when the expected interest does not show up. While the law does provide interest on late refunds, it is not paid in every situation. As per Section 244A of the Income Tax Act, interest on delayed refunds is calculated at 6 per cent per year, starting from April 1 of the assessment year until the refund is credited.
Mumbai, December 23: Delays in receiving income tax refunds are a common concern for taxpayers, especially when the expected interest does not show up. While the law does provide interest on late refunds, it is not paid in every situation.
As per Section 244A of the Income Tax Act, interest on delayed refunds is calculated at 6 per cent per year, starting from April 1 of the assessment year until the refund is credited. However, tax experts point out that this interest is payable only when the delay is entirely on the tax department’s side. PAN-Aadhaar Link Deadline Nears: December 31 Last Date to Keep PAN Card Active, Know How To Check PAN-Aadhaar Link Status.
Why Income Tax Refunds Are Taking Longer
Refund timelines have stretched due to increased scrutiny and verification by the Income Tax Department. Errors such as incorrect bank details, Aadhaar–PAN linking issues, mismatches in TDS data, or wrong claims in returns often slow down processing. The CBDT has also tightened checks on incorrect deductions, which has added to delays.
Cases Where Interest on Income Tax Is Not Paid
According to chartered accountant Dr Suresh Surana, interest is denied if the delay is caused by the taxpayer. This includes situations where returns have errors, required information is missing, or responses to tax notices are delayed. In such cases, the law treats the delay as self-inflicted, making the taxpayer ineligible for interest. Got a Tax ‘Nudge’ Email? Know Why Income Tax Department Is Sending Intimations.
Interest rules are also stricter for refunds arising from self-assessment tax. If excess tax was paid voluntarily and later claimed as a refund, interest may not be applicable. Additionally, no interest is paid if the refund amount is below Rs 100.
Recent CBDT guidelines allow the Centralised Processing Centre to correct errors and adjust refunds against pending tax dues. This can either reduce the refund amount or delay the final credit to the taxpayer’s account. Refunds often get delayed due to mismatches between income or TDS details reported in returns and data reflected in Form 26AS, AIS, or TIS. Scrutiny cases, unverified bank accounts, pending rectification requests and outstanding tax demands are other common reasons for delays.
To ensure faster refunds and avoid loss of interest, taxpayers should file accurate returns, keep bank details updated and verified, link Aadhaar with PAN, and respond quickly to any communication from the tax department. Interest on delayed refunds is meant as compensation, but it applies only when the delay is not caused by the taxpayer.
(The above story first appeared on LatestLY on Dec 23, 2025 08:55 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).