Belated ITR Filing: Will You Still Earn Interest on Your Income Tax Refund for AY 2025-26?

The deadline for filing the Income Tax Return (ITR) for Assessment Year (AY) 2025-26 (for Financial Year 2024–25) in non-audit cases typically ends in September. Once this deadline is missed, taxpayers are still allowed to file a belated return until December 31st of the assessment year, albeit with a penalty of up to ₹5,000.

For many taxpayers, missing the deadline raises a critical question: If the Income Tax Department owes you a refund, will you still receive the interest due on that amount, or does the belated filing forfeit this benefit?

The good news is that you are still entitled to receive interest on your pending tax refund, but the date from which this interest is calculated changes significantly.

Understanding Interest on Refund: Section 244A

The taxpayer's entitlement to interest on a delayed refund is governed by Section 244A of the Income Tax Act, 1961. This section ensures that the government compensates taxpayers for the period during which their money remains with the department beyond the statutory timeline.

The interest is paid at a rate of 0.5% per month or part of a month on the gross refund amount.

The Critical Difference: Timely vs. Belated Filing

The start date for interest calculation is the key differentiator between a return filed on time and a belated return.

Scenario	Start Date for Interest Calculation
Timely Filed Return (Filed by Due Date, e.g., September 16th)	Interest is calculated from April 1st of the Assessment Year (e.g., April 1, 2025) up to the date the refund is paid. This is a full year's interest entitlement.
Belated Filed Return (Filed After Due Date, e.g., after September 16th)	Interest is calculated from the date of filing the return up to the date the refund is paid.

 

Example of Impact:

ü  Taxpayer A files their ITR on September 15th (on time). The refund is issued on January 15th, 2026. Interest is calculated from April 1, 2025, to January 15, 2026 (approx. 10 months).

ü  Taxpayer B files their ITR on October 31st (belated). The refund is issued on January 15th, 2026. Interest is calculated from October 31, 2025, to January 15, 2026 (approx. 2.5 months).

Conclusion: By filing a belated return, you lose the interest component for the period from April 1st up to the date you actually file the return. You effectively penalize yourself by reducing the total interest you receive.

Mechanics of Interest Calculation

The calculation of interest under Section 244A begins from the later of the following two dates:

1. The end of the month in which the income tax return was filed (if belated).
2. The end of the month in which the assessment or determination of the refund was completed.

The interest continues to accrue on a monthly basis until the refund amount is credited to the taxpayer's account.

This interest is calculated on the gross amount of the refund, which may include tax paid through:

ü  Tax Deducted at Source (TDS)

ü  Advance Tax

ü  Self-Assessment Tax

What to Do in Case of Refund Delays

While Section 244A is designed to protect taxpayer rights, delays can still occur. Taxpayers should be proactive if their refund is pending:

1. Monitor Status: Actively monitor the status of your refund through the Income Tax Department's e-filing portal.
2. Follow Up: If delays persist, follow up with the Central Processing Centre (CPC) or the relevant Assessing Officer.
3. Ensure Accuracy: Interest may not be payable if the delay is caused by errors in the return, incorrect information, or non-compliance on the part of the taxpayer. Conversely, delays due to administrative or technical issues by the Department entitle the taxpayer to the interest.
4. Maintain Documentation: Always keep proper documentation of the refund claim, payment proofs, and all correspondence with the Department.

In summary, even if you file a belated ITR, the law ensures you are compensated with interest for the period the government holds your money. However, filing on time remains crucial to maximize your interest earnings and avoid the penalty associated with belated returns. Section 244A reinforces the principle of government accountability, ensuring taxpayers are not unduly disadvantaged by procedural delays.