Millions of taxpayers across India have breathed a sigh of relief as the Income Tax Department has extended the deadline for filing income tax returns (ITR) for the financial year 2024-25. Typically, the last date for filing ITR is July 31 of every financial year, but this time, the deadline has been pushed to September 15.

This decision has benefited many, with taxpayers now expecting significantly higher interest on their pending refunds. Several individuals have already thanked the tax department for the additional interest they stand to gain.

Why Will Refund Amounts Increase?

If a taxpayer has paid excess tax through advance Tax Deducted at Source (TDS), advance tax, or by depositing more than their assessed tax liability, they are entitled to a refund. Under Section 244A of the Income Tax Act, the tax department pays interest at 0.5% per month on excess tax collected until the refund is processed.

This interest is calculated from April 1 of the assessment year and continues until the refund is issued. Since the ITR filing deadline has been extended by 1.5 months, taxpayers whose refunds are processed in October will receive an additional two months’ interest on their refund amount.

Chartered Accountant’s Explanation: 33% More Interest

According to Chartered Accountant Suresh Surana, the last date for filing income tax returns for FY 2024-25 has been extended from July 31 to September 15, 2025. As a result, taxpayers could receive 33% more interest on their refunds if processed by October. Under Section 244A, the government pays interest at 0.5% per month (6% annually) on refunds. The two-month extension means taxpayers will also earn interest for this additional period.

Remember: Additional Interest Is Taxable

However, it is important to note that the interest received on tax refunds is considered “Income from Other Sources” under the Income Tax Act and is therefore taxable. This means taxpayers must pay income tax on the extra interest earned.

Nevertheless, while the extended deadline has eased the burden on taxpayers, the prospect of higher interest on refunds has also sparked new optimism among them.