ITR filing deadline extension = bigger refunds? Tax experts decode the money math for domestic taxpayers, NRIs

The Central Board of Direct Taxes (CBDT) announced on 27th May, 2025, that the due date for filing Income Tax Returns (ITR) for non-tax audit cases in the assessment year 2025-26 has been extended to 15th September, 2025. This new deadline offers taxpayers more time to accurately file their returns and helps streamline the e-filing process. Typically, the deadline for ITR filings is 31st July of the assessment year, but this extension will allow for reduced errors and improved efficiency in the filing process. 

While the extension offers filing relief, it brings a surprising benefit for taxpayers expecting refunds. The new timeline triggers higher interest payouts on excess taxes paid through TDS or advance tax—especially relevant for non-resident Indians (NRIs).

Under Section 244A of the Income Tax Act, the department must pay simple interest at 0.5% per month on refund amounts due to overpayment. Though this interest is taxable, many taxpayers may still enjoy a tax-free benefit due to the enhanced Section 87A rebate, which allows zero tax up to Rs 12 lakh for non-salaried individuals and Rs 12.75 lakh for salaried taxpayers starting FY 2025-26.

Under Section 244A of the Income Tax Act, the department is obligated to pay a simple interest of 0.5% per month on the refund amount if there has been an overpayment of taxes. Although this interest is a taxable income, many may find that this additional income remains tax-free due to the increased Section 87A tax rebate, which allows tax-free income up to Rs 12 lakh for non-salaried and Rs 12.75 lakh for salaried individuals starting FY 2025-26.

CA (Dr.) Suresh Surana told the Economic Times: “The press release dated 27th May 2025 clarified that the due date for filing an ITR under Section 139(1) stands extended from July 31, 2025 to 15 September 15, 2025. Accordingly, when an assessee furnishes their ITR on or before 15th September 2025, such ITR will be treated as filed within the time allowed under Section 139(1). As a result, interest under Section 244A on eligible tax refund amounts will be payable from April 1, 2025, even if the ITR is furnished after July 31, 2025 but within the extended due date of September 15, 2025.

This means that interest on eligible refunds will be payable from 1 April 2025, offering a financial cushion to taxpayers who manage to file within the new deadline.

However, CA Chirag Chauhan warns about the systemic delays that this extension might cause, noting, "Delay in releasing utility means delay in ITR filing, resulting in delay in refund. All the refunds which are being stuck will get delayed. Also, the government will have a huge bill of paying additional interest on tax refunds, which will be funded again by the taxpayer’s money." This scenario highlights the possible burden on the Treasury due to increased interest payouts.

Interest implications under Sections 234A and 234B of the Income Tax Act also come into play. For those who pay Self-Assessment Tax by 15 September, CA Abhas Halakhandi explains that interest under Section 234B, which pertains to shortfalls in advance tax payments, will still apply for six months from April to September. Interest under Section 234A, related to delays in filing returns, is not applicable up to the new deadline, easing some of the financial pressures on taxpayers who file within the extended timeline.

✅ Before Extension

(Assume original due date was 31st July)

If tax is paid on 15th September:

Interest under Section 234B (for shortfall in advance tax payment):

Interest is charged for 6 months (from April to September).

Why? Because 234B interest is calculated from 1st April till the date of payment, if 90% of tax was not paid as advance tax.

Interest under Section 234A (for delay in filing return after due date):

Interest is charged for 2 months (from August to September).

Why? Because return is filed after 31st July, the original due date. So, interest is charged @1% per month from 1st August till 15th September.

✅ After Extension (New Due Date = 15th September)
(Government extends ITR due date to 15th September)

If tax is paid on 15th September:

Interest under Section 234B:

Still applicable for 6 months (April to September).

Because 234B is independent of the ITR filing deadline and kicks in if advance tax was short.

Interest under Section 234A:

Not applicable till 15th September.

Why? Because the return is filed within the extended due date, so no delay under 234A.

The ITR deadline extension gives taxpayers more time—but also brings bigger refund interest for those who’ve overpaid. However, delays in utilities and backend processes could slow actual disbursement. Both Indian residents and NRIs should file strategically to maximise benefits while staying alert to interest and tax implications.