Last Updated:May 30, 2025, 10:37 IST
ITR Filing Last Date 2025 Extension: If a taxpayer delays filing the ITR till September 15, the refund would be processed later — mayby by the end of September.
As per Section 244A of the Income Tax Act, the income tax department pays simple interest at the rate of 0.5% per month on the refund amount for the duration it remains with the department.
ITR Deadline Extension 2025: The Income Tax Department has extended the deadline for filing Income Tax Returns (ITR) for the financial year 2024-25 (assessment year 2025-26) from July 31, 2025, to September 15, 2025. While this offers more time for taxpayers to file their returns, it also comes with an interesting financial advantage — those eligible for income tax refunds may receive over 30% more interest on the refund amount.
Also See: ITR Filing Begins: Excel Utilities Released For ITR-1, ITR-4; Check Eligibility For AY 2025-26
Why Tax Refunds Come with Interest
Taxpayers are eligible for an income tax refund when the taxes they’ve already paid — such as through TDS (tax deducted at source) or advance tax — exceed their actual tax liability. As per Section 244A of the Income Tax Act, the Income Tax Department pays simple interest at the rate of 0.5% per month on the refund amount for the duration it remains with the department.
For returns filed on or before the due date, interest on the eligible tax refund is calculated from April 1 of the assessment year until the refund is processed. If a return is filed after the due date, interest is calculated from the date of filing.
How Deadline Extension Benefits Taxpayers
With the new deadline extended to September 15, 2025, returns filed on or before this date will still be considered ‘on time’. This means that taxpayers who file by the new deadline will get interest from April 1, 2025, up to the date the refund is processed — just like they would if they had filed by the original July 31 deadline.
However, if a taxpayer delays filing the ITR till September 15, the refund would be processed later — potentially closer to the end of September. This longer holding period results in more interest being paid out by the Income Tax Department.
Why Over 30% More Interest?
Interest on the ITR refund is calculated from April 1. As the deadline has been extended by till September 15, the extra number of days (46 days) is 31.94 per cent higher as compared with 144 days (April 1-July 31).
Example of Extra Interest Benefit
Consider a taxpayer eligible for a refund of Rs 25,000. If the return was filed and processed by July 31, the taxpayer would have received Rs 500 as interest. But, if the return is filed by the extended deadline of September 15 and the refund is paid by September 30, the interest would rise to Rs 750, an increase of 33 per cent.
Taxability Of Refund Interest Income
It’s important to note that the interest received on tax refunds is considered income and must be reported under the head ‘Income from Other Sources’ in the year it is received. However, due to the increased Section 87A rebate, taxpayers with income up to Rs 12 lakh (non-salaried) and Rs 12.75 lakh (salaried) in FY 2025-26 (AY 2026-27) may not have to pay any tax on this interest income, making the benefit effectively tax-free for many.
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