How ITR deadline extension boosts your refund

May 29, 2025 Finance Talk Valli Sarvani

The Income Tax Department’s extension of the ITR filing deadline for FY 2024-25 to September 15, 2025, offers more than just extra time, it also brings a noteworthy financial gain for taxpayers.

Taxpayers eligible for a refund may now earn over 30% more interest on the refund amount.

This benefit arises due to Section 244A of the Income Tax Act, which mandates a 0.5% monthly simple interest on excess tax paid.

When you file your return on or before the due date, interest on the refund is calculated from April 1 of the assessment year until the refund is processed. The good news is that returns filed by September 15 will still be treated as filed on time.

This means that even if you file in August or early September, the interest clock still starts from April 1, 2025, not from the filing date.

Let’s say you’re due a refund of ₹25,000. If your return is processed by July 31, you’ll earn about ₹500 in interest.

However, if you file by September 15 and the refund is processed by September 30, your interest would jump to ₹750.

That’s a 33% increase, just for waiting longer to file (but still filing within the deadline).

The extra 46 days (from August 1 to September 15) represent a 31.94% increase in the interest period, translating to more money in your account.

This extra interest is taxable. It falls under ‘Income from Other Sources’. But here’s more relief: Thanks to a higher Section 87A rebate, many salaried individuals with income up to ₹12.75 lakhs, and non-salaried up to ₹12 lakhs, may pay zero tax on this interest.

The deadline extension is more than a grace period; it’s a chance to maximize your tax refund interest. Use this extra time wisely to prepare and take advantage of the potential interest on your tax refund.

Image by Kundan Kumar from Pixahive (Free for commercial use / CC0 Public Domain)

Image Published on January 30, 2021