ITR Filing 2025: Know What the Extended Deadline Means for Your Tax Refund Interest

The Income Tax Department has pushed back the deadline for ITR filing 2025 (Assessment Year 2025-26) from July 31, 2025, to September 15, 2025. While this extension offers more time to taxpayers, it also brings an unexpected benefit for those expecting a tax refund: potentially more interest on their refund amount.

How Will You Benefit from the Extended Deadline During ITR Filing 2025?

If you're among the taxpayers expecting a refund because you've paid more tax than your actual liability (through TDS, advance tax, etc.), this extension could mean a larger interest payout. The Income Tax Department pays simple interest at a rate of 0.5% per month (or part of a month) on the refund amount, as per Section 244A of the Income Tax Act.

Previously, if you filed your ITR by July 31, 2025, and your refund was processed quickly, you would receive interest up to that point. However, with the new deadline of September 15, 2025, even if you file your return later (but by the extended deadline), the interest will still be calculated from April 1, 2025, until your refund is processed. This can result in up to 33.33% more interest.

For example, if you were eligible for a ₹25,000 refund and filed by July 31, you might have received ₹500 in interest. If you now file by September 15 and your refund is processed by September 30, you could receive ₹750 in interest, which is ₹250 more. 

Understanding How It Will Work

While the due date for ITR filing 2025 is extended, the actual refund is dependent on when you file and when the Centralised Processing Centre (CPC) processes your return. If you file closer to the new deadline of September 15, 2025, and your refund is processed afterwards, you'll accumulate interest for the extra period. 

Returns filed by September 15, 2025, will still be considered filed within the time limit under Section 139(1). This means interest under Section 244A will be payable from April 1, 2025, even if the ITR is filed after July 31, 2025.  

Is This Interest Taxable?

Yes, the interest you receive on your tax refund is considered taxable income under the head "Income from Other Sources". However, for Financial Year 2025-26 (Assessment Year 2026-27), many taxpayers might still find this interest tax-free. This is due to the increased tax rebate under Section 87A, which allows non-salaried individuals to have completely tax-free income up to ₹12 lakh and salaried individuals up to ₹12.75 lakh. So, for many, the extra interest, though taxable, might not actually lead to a higher tax bill.

Read more on: Income Tax AY 2025-26 Guide: Claiming Pre-Construction Interest on Home Loans in ITR 

Conclusion 

The extension of the ITR filing deadline to September 15, 2025, is a welcome relief for taxpayers. Beyond providing more time, it also offers a surprising bonus in the form of increased interest on tax refunds for eligible individuals. While this interest is taxable, the enhanced Section 87A rebate may ensure it remains effectively tax-free for many.
 

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