ITR filing late or refund delayed? Here's interest you pay and what taxman owes you

Tax

• Late ITR filing attracts 1 percent interest per month if tax is unpaid
• Govt pays 0.5 percent interest per month on delayed refunds over Rs 100
• Refund delays often caused by mismatches, unverified bank details, or scrutiny

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For many taxpayers, the tax season ends with one of two outcomes: paying interest for filing late or waiting endlessly for a refund. Let us understand how much taxpayers pay for missing deadlines and how much the government pays when refunds are held back.

Interest burden when taxpayers file late:

When an income tax return is filed after the prescribed deadline and tax remains unpaid, interest starts accruing automatically. “For delayed ITR Filing, interest liability is 1 percent per month as per provisions of Section 234A,” said CA Viraj Mehta, Chairman Direct Taxes Committee at Chamber of Tax Consultants.

CA Mrinal Mehta, Joint Secretary at BCAS, explains how interest is applicable with an example. “If tax is paid on Dec 30, 2025, the Interest will be levied at 1 percent from Sept 16, 2025 (due date) till Dec 30, 2025 (i.e. 4 percent for 4 months).”

“Whether for late filing of the return, failure to discharge advance tax, or deferment of advance-tax instalments, such interest generally runs from the prescribed due date or from 1 April of the relevant assessment year until actual compliance,” said Tushar Kumar, Advocate, Supreme Court.

It is important to note that this interest applies only where tax is payable. If a taxpayer has already cleared all dues and is filing late only to complete formalities, this interest provision does not apply.

Interest payable by the government when refunds are held back

If excess tax paid by a taxpayer is not refunded within the stipulated time, the income tax department must pay simple interest at 0.5 percent per month.

“Government pays taxpayer interest at 0.5 percent per month under Section 244A of the Income Tax Act. The interest is calculated from April 1st of that Assessment Year until the date the refund is granted. In case the filing is late, then interest is calculated only from the date the taxpayer actually filed the return until the date the refund is granted,” said Rohit Jain, Managing Partner, Singhania & Co.

Why tax refunds get held up

Refunds are often delayed for a mix of technical and compliance-related reasons, including:

• Differences between figures reported in the ITR and details available in Form 26AS, AIS or TIS
• Bank accounts are not pre-validated on the income tax portal
• PAN not linked with Aadhaar
• Returns selected for scrutiny or pending verification
• Existing tax dues are adjusted against the refund
• Processing backlogs during peak filing seasons
• In many cases, even a minor mismatch or missing detail is enough to move a return out of automated processing and into manual checks, which slows down the refund.

When the refund interest may be reduced or denied

Interest is not payable in the following situations:

• The delay results from errors or missing information in the return filed by the taxpayer
• The taxpayer does not respond to income tax notices or seek repeated extensions
• The refund arises only because of excess self-assessment tax paid under Section 140A
• The refund amount is below Rs 100, which falls outside the threshold set under the law
• These conditions apply across categories, whether the taxpayer is a salaried individual, self-employed professional, business entity, company, or a Hindu Undivided Family (HUF)

If a tax refund or the applicable interest does not get credited, what steps should you take?

• Track the refund status on the income tax e-filing website
• Verify that bank account details are correctly updated and pre-validated
• In case the refund has failed, place an online request for re-issue of the refund
• If the refund amount is short or interest has not been credited, submit either: * A rectification application under Section 154, or * A grievance through the e-Nivaran facilityFor matters that remain unresolved, reach out to the Centralised Processing Centre (CPC), Bengaluru.