Section 244A Income Tax Act - Interest on Refunds
Interest on an income-tax refund compensates a taxpayer when excess tax remains with the Government. Section 244A of the Income-tax Act, 1961 prescribes the circumstances, rate and period for such interest. For matters governed by the Income-tax Act, 2025, the corresponding provision is Section 437. The applicable Act and tax year must be checked before calculating interest.
Meaning and scope of Section 244A
Section 244A, introduced with effect from 1 April 1989, replaced the earlier refund-interest framework for assessment year 1989-90 onwards. It covers interest on excess advance tax, tax deducted or collected at source, self-assessment tax, and other qualifying payments. The section also addresses appellate refunds, deductor refunds, taxpayer-caused delays and subsequent adjustment of interest.
Section 244A(1): rate and starting date
| Refund category | Interest period under the 1961 Act | Rate |
|---|---|---|
| Advance tax, TDS treated as paid under section 199, or TCS under section 206C; return filed on time | 1 April of the assessment year until the date the refund is granted | 0.5% per month or part |
| Same category; return not filed by the section 139(1) due date | Date of filing the return until refund | 0.5% per month or part |
| Self-assessment tax under section 140A | Later of date of filing the return and date of tax payment, until refund | 0.5% per month or part |
| Other qualifying tax or penalty paid in excess of demand | Relevant date or dates of excess payment until refund | 0.5% per month or part |
10% threshold: Under the proviso to section 244A(1), interest under clauses (a) and (aa) is not payable where the refund is less than 10% of the tax determined under section 143(1) or regular assessment. The wording is less than 10%, not less than or equal to 10%. This threshold does not automatically disqualify interest under clause (b).
Special application-based refunds: A specific proviso to clause (a), inserted with effect from 1 October 2023, provides for the interest period beginning with an application under section 155(20) where the prescribed conditions are met.
Section 244A(1A): additional interest following appeal
Where a refund arises from giving effect to a qualifying appellate or revision order, otherwise than by a fresh assessment or reassessment, an additional 3% per annum may be payable on the qualifying refund, over and above ordinary section 244A(1) interest. The period starts after the time allowed under section 153(5) expires and runs until the refund is granted, subject to statutory exclusions. In particular, periods of valid withholding under section 245(2) are excluded as provided by the amended proviso.
Section 244A(1B): interest payable to a deductor
Where a deductor becomes entitled to a refund of tax deposited under Chapter XVII-B, interest is generally 0.5% for every month or part thereof, calculated from the date of the prescribed refund claim or, for specified refunds arising from appellate orders, from the date the tax was paid, until the refund is granted.
Section 244A(2): delay attributable to taxpayer or deductor
Any period of delay in the proceedings resulting in the refund that is attributable to the assessee or deductor is excluded from the interest calculation. Disputes about the excluded period are decided by the specified senior income-tax authority under the section.
Section 244A(3): reassessment of interest
If a subsequent statutory order increases or reduces the amount on which refund interest was calculated, the interest must be recomputed. Excess interest already paid can be recovered through a notice of demand treated as a notice under section 156.
Income-tax Act, 2025: Section 437
Section 437 of the Income-tax Act, 2025 sets out refund interest for matters governed by that Act. It preserves the general rate of 0.5% per month or part and organizes the starting dates in a statutory table. Its subsection (2) retains the less-than-10% restriction for the first two categories; subsection (3) covers a specified application-based refund; subsections (4) and (5) concern additional 3% annual interest and withholding exclusions; subsection (6) covers deductors; subsections (7) and (8) address attributable delay; and subsections (9) to (11) provide for adjustment and recovery of excess interest.
The 2025 Act uses updated cross-references, including sections 263(1) (return due date), 266 (self-assessment tax), 270(1) (processing), 289 (demand), and 438 (refund set-off and withholding). For older assessment years and transitional proceedings, consult the repeal-and-savings provisions and the law applicable to the relevant year.
Illustrative calculation
Assume a qualifying refund of Rs. 50,000 earns interest for five months under the relevant statutory period and no exception applies. Interest is Rs. 50,000 x 0.5% x 5 = Rs. 1,250. This is only an illustration: an actual computation may involve part-month counting, different payment dates, the 10% condition or excluded periods.
How to check an interest-on-refund amount
- Identify the assessment year or tax year and the applicable Act.
- Confirm the category of tax that produced the refund and the return-filing date.
- Compare the refund amount with the statutory 10% threshold where applicable.
- Check the refund issue date, payment history, appellate orders and any excluded delay.
- Review the intimation or refund computation on the Income Tax e-Filing Portal. Where appropriate, seek rectification or use the prescribed grievance and appellate remedies.
Frequently asked questions
Is refund interest always 6% per annum?
The general rate is 0.5% for every month or part of a month. The actual entitlement and period depend on the refund category, statutory exceptions and applicable law. Certain qualifying appellate refunds may also earn additional interest.
Does every refund earn interest?
No. In specified categories, no interest is payable when the refund is less than 10% of the tax determined under the relevant provision. Other statutory conditions and exclusions may also apply.
Does filing a late return change interest?
Yes. For specified advance-tax, TDS and TCS refunds, the starting date ordinarily shifts from 1 April of the assessment year to the return-filing date when the return is not filed by the due date.
Can interest be reduced after an appeal or reassessment?
Yes. The law requires consequential adjustment if a later order changes the refund base, and excess interest may be recovered.
Official statutory references
Income Tax Department: Section 244A, Income-tax Act, 1961; Section 437, Income-tax Act, 2025; Income-tax Act, 2025 (official PDF); Section 438: set-off and withholding of refunds.
Updated 27 October 2026. This article is general legal information; verify the applicable statutory text, notifications and case-specific facts before acting.