Refund Interest Under Section 437 (Formerly 244A), Worked Out

Your refund of ₹21,700 for AY 2026-27 lands in your account on 20 August 2026 as ₹22,242 or so. The extra ₹542 is interest the government pays for holding your money: 0.5% of the refund for every month or part of a month, counted from 1 April 2026 because you filed by the due date.

That is the whole rule in one line. The rest of this post covers which section applies to which year, how the months are counted, when no interest is paid at all, and how to check CPC's figure against your own.

Which law applies: section 244A or section 437

The Income-tax Act, 2025 came into force on 1 April 2026. Refund interest under the new Act is in section 437. The old Act's section 244A has not disappeared for older years, though.

Section 536 of the 2025 Act (repeal and savings) says that where a refund for a tax year that began before 1 April 2026 falls due on or after that date, the 1961 Act's provisions on interest on refunds still apply. Only the rate is taken from the new Act, and both Acts use the same rate of 0.5% a month.

So every refund being paid in 2026, including the AY 2026-27 refunds now arriving, is worked out under section 244A. Section 437 first matters for returns for Tax Year 2026-27, which are filed in 2027. For that year, interest on a refund out of TDS or advance tax will run from 1 April 2027 if the return is filed by its due date. If you are unsure which Act covers a notice or refund, see which law applies to your return or notice.

The three cases in the law

Section 437(1) sets out a table with three rows. Section 244A(1) has the same structure, and the periods match.

1. Refund out of TDS, TCS or advance tax. Interest runs from 1 April of the year following the tax year (under the old Act, 1 April of the assessment year) to the date the refund is granted, if the return was filed on or before the due date. If the return was filed late, interest runs from the date of filing instead.
2. Refund out of self-assessment tax (tax you paid yourself before filing). Interest runs from the date you filed the return or paid the tax, whichever is later, to the date the refund is granted.
3. Any other case, such as tax paid against a demand that is later reduced on appeal or rectification. Interest runs from the date you paid more than the demand to the date the refund is granted.

The rate is simple interest at 0.5% for every month or part of a month. A period from 1 April to 20 August counts as five months: April, May, June and July in full, and August as a part month.

Worked examples

All three examples use the same salaried taxpayer for AY 2026-27. CPC's 143(1) intimation (the processing summary from the Centralised Processing Centre) determines tax of ₹1,72,300 against TDS of ₹1,94,000, so the refund is ₹21,700.

Example 1: filed by the due date

The return was filed on 18 July 2026, before the 31 July due date, and the refund was granted on 20 August 2026.

CPC rounds amounts under the rules, so its figure can differ from yours by a few rupees. A difference of hundreds of rupees is worth looking into.

Example 2: filed after the due date

Same refund, but the return was filed late on 10 October 2026 and the refund was granted on 25 November 2026. Interest now runs from the date of filing.

• 10 October to 9 November is one month.
• 10 November to 25 November is a part month, counted as a full month.
• Interest is ₹21,700 × 0.5% × 2 = ₹217.

Filing late cost this taxpayer about ₹325 of interest, on top of any late fee.

Example 3: refund below 10% of the tax

Suppose CPC determines tax of ₹1,72,300 and the refund is ₹15,000. That is 8.7% of the tax determined, below 10%. Under section 244A(1), no interest is payable on a refund out of TDS, TCS or advance tax if the refund is less than 10% of the tax determined on processing or regular assessment. You get ₹15,000 and nothing more.

Section 437(2) keeps the same 10% test for Tax Year 2026-27 onwards and says in terms that it covers refunds of self-assessment tax as well. Under section 244A, whether the test reaches self-assessment refunds has been argued both ways before tribunals, so if a small self-assessment refund came back without interest, ask a chartered accountant before you dispute it.

When interest is cut or taken back

• Delays caused by you. If the proceedings that lead to the refund are delayed for reasons attributable to you, that period is excluded from the interest (section 437(7); the old Act has the same rule).
• The refund changes later. If a rectification, appeal or other order changes the refund, the interest is increased or reduced to match (section 437(9)). If interest is reduced, the Assessing Officer issues a demand notice for the excess interest already paid (section 437(10)).
• Late effect to an appeal order. Where a refund arises from giving effect to certain appellate orders and the department misses its time limit, section 437(4) adds 3% a year on top of the regular interest for the delay.

How to check the figure CPC paid

1. Log in at incometax.gov.in and go to e-File > Income Tax Returns > View Filed Returns.
2. Open the return for the year and download the intimation. The intimation for AY 2026-27 is issued under section 143(1) of the 1961 Act and shows the refund interest on its own line.
3. Note three things: the refund on which interest was computed, the start date (1 April or your filing date) and the date the refund was granted.
4. Count the months, including any part month as a full month, and multiply by 0.5%.
5. If CPC's interest is far lower than your figure, check whether the return was treated as filed late (for example, because it was e-verified after the 30-day window, which makes the verification date the filing date; see what happens after missing the 30-day e-verification window). A computation mistake in the intimation can be corrected through a rectification request.

How to read your 143(1) intimation line by line shows where the interest sits in the intimation, and ITR processed but no refund in your bank covers what to do when the credit hasn't arrived.

Refund interest is taxable

Interest received on an income tax refund is income, taxed under "income from other sources" in the year you receive it. The ₹542.50 from Example 1, received in August 2026, belongs in the return for Tax Year 2026-27, filed in 2027. The refund itself is not income; only the interest is. Look for it in your AIS for that year before you file.

Tracking the refund itself

myutils.me is an independent app, not affiliated with the Income Tax Department. It signs in to the portal for each PAN you add and shows each year's ITR status and refund status with the account and bank reference, refreshed when you press Sync. It does not compute refund interest; use the steps above for that.

FAQ

What is the rate of interest on an income tax refund?

0.5% a month, simple interest, under both section 244A of the 1961 Act and section 437 of the 2025 Act. Any part of a month counts as a full month.

From which date is refund interest paid for AY 2026-27?

From 1 April 2026 if you filed by the due date and the refund comes out of TDS, TCS or advance tax. If you filed late, it runs from the date of filing. For self-assessment tax, it runs from the later of the filing date and the payment date.

Why did I get no interest on my refund?

The most common reason is that the refund out of TDS or advance tax was less than 10% of the tax determined on processing. Other reasons are a refund granted within a few days of filing a late return, or a delay that the department attributed to you.

Does section 437 apply to my AY 2026-27 refund?

No. Refunds for AY 2026-27 and earlier are computed under section 244A, as section 536 of the 2025 Act keeps those provisions alive for older years. Section 437 applies from Tax Year 2026-27, whose returns are filed in 2027. The rate is the same.

Is interest on a tax refund taxable?

Yes. It is taxed as income from other sources in the year you receive it, at your slab rate.

Sources

• Income Tax Department: Section 437, Income-tax Act, 2025 (interest on refunds)
• Income Tax Department: Section 244A, Income-tax Act, 1961
• Income Tax Department: Refund status user manual
• Income Tax Department: e-verification and the 30-day timeline FAQ
• Income-tax Act, 2025, section 536 (repeal and savings), on the Income Tax Department website