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May 29, 2025
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33% more money on tax refund interest this year for income taxpayers due to ITR filing deadline extension
The Income Tax Department has extended the due date for Income Tax Return (ITR) filing from July 31, 2025, to September 15, 2025. However, there is an unintended consequence of ITR filing deadline extension by income tax department for FY 2024-25 (AY 2025-26). This deadline extension may result in higher interest payout for many people claiming income tax refund this year including both Indian and NRI taxpayers.
Taxpayers can claim an income tax refund in their ITR, when their income tax liability is lower than the tax amount already deposited by them through TDS deduction, advance tax, etc. Under Section 244A, the income tax department has to pay simple interest of 0.5% interest on the whole or the excess amount of tax refund so refunded, for every month or part of a month. However, one has to remember that this interest on tax refund is taxable as income from other sources in the relevant year of earning.
Many taxpayers won’t mind this increased income as this income may still remain tax-free for them.
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