ITR deadline extended: Taxpayers may get 33% higher refund interest as ITR filing pushed till September 15 

With the Income Tax Return (ITR) filing deadline for FY 2024–25 (AY 2025–26) now extended to September 15, 2025, taxpayers stand to gain more than just extra time. Those expecting refunds could see a 33% increase in the interest component of their tax refunds—provided the returns are filed by the new deadline and processed in October.

The deadline for filing ITR has been extended, giving taxpayers more time to submit their returns. This extension not only benefits those who need extra time to file but also provides a surprise advantage to taxpayers eligible for income tax refunds. When a taxpayer has paid more taxes than required, they are entitled to a refund. 

The tax department is required to pay simple interest at a rate of 0.5% per month on the excess tax paid as TDS, TCS, or advance tax under Section 244A. However, interest on tax refunds is only paid if the refund amount exceeds 10% of the total tax paid for the relevant assessment year. This interest is then taxable as income from other sources in the following assessment year.

In FY 2024–25, the income tax department disbursed Rs 1.9 lakh crore in refunds to non-corporate taxpayers—including individuals and HUFs—up from Rs 1.57 lakh crore in the previous year.

Under Section 244A of the Income Tax Act, taxpayers are entitled to simple interest at 0.5% per month (6% annually) on refunds due to them. Normally, returns filed by the standard July 31 deadline start accruing interest until the refund is issued. However, with the new extended deadline, the interest accrual period increases by 1.5 months, assuming the refund is processed in October 2025.

CA (Dr) Suresh Surana said, “With the ITR filing deadline for FY 2024-25 (AY 2025-26) now extended to 15 September 2025, taxpayers may see an increase in refund of about 33% in the interest amount received on their tax refunds provided the returns are filed by September 15, 2025 and the corresponding refunds are assumed to be processed in October 2025.”

He added, “This is because Section 244A allows for simple interest at 0.5% per month (6% annually) on refunds. The additional 1.5 months between the usual deadline of July 31 and the revised deadline of September 15 increases the interest accrual period. If the refund (for return which is filed by 15 September) is processed in October, the interest component alone could rise by about 33% (i.e. interest would accrue for an additional 2 months) compared to a typical year. If the processing is delayed beyond October, the interest may increase even further.”

The extension provides added relief for taxpayers, especially those awaiting large refunds, as the interest component becomes more significant. Experts advise taxpayers to file by the new deadline to benefit from both the additional time and the increased refund interest.

The deadline extension also gives the Income Tax Department more time to improve system readiness and reduce processing delays.

Is it wise to wait until September to file your ITR?

While the extended deadline for filing Income Tax Returns (ITR) may lead to a slightly higher interest payout on refunds, the actual benefit is marginal. Waiting until September just to earn a bit more interest might not be worthwhile. Instead, filing your return early helps in faster refund processing, gives you peace of mind, and leaves room to revise your return before the deadline if needed—without any additional cost.

Early filing also reduces the risk of last-minute errors or technical glitches on the portal. Remember, revisions are allowed for free before the due date.