Does the tax authority pay interest on my refund?

If it is late, yes. India pays half a percent a month under section 244A, subject to conditions. The IRS pays interest on refunds not issued within 45 days of the filing deadline, at a rate it resets quarterly. Either way it is taxable income when you receive it.

Is a large refund good?

It means you overpaid through the year and lent the money at a poor rate, or at no rate at all. Adjusting your withholding is usually better than collecting a refund.

Taxincome tax

Income Tax Refund Estimator

Your refund, and the interest the tax authority owes you on it if it is late. That interest is routinely overlooked and is taxable when you receive it.

Also called: tax refund calculator india, itr refund, irs refund estimator.

Refund due

₹35,000

₹35,000 refundable: ₹1,80,000 paid against a liability of 1,45,000. Interest adds ₹700 over 4 months, bringing the total to ₹35,700. Interest runs under section 244A, and is taxable in the year you receive it.

Total paid

₹1,80,000

Excess before interest

₹35,000

Interest on the refund

₹700

Total receivable

₹35,700

Payable instead, if any

₹0

Position

A refund is due, and the interest on it is taxable when received.

On the interest

Interest runs under section 244A, and is taxable in the year you receive it.

How this is calculated

Computed from the published rates for the tax year you selected, which is not necessarily the current year. A calculation, not tax advice, and it does not know anything about your circumstances beyond the figures entered.

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for India change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

A refund is simply everything paid in during the year less what you actually owed. What counts as paid in differs: in India that is TDS, TCS, advance tax and self assessment tax, and in the United States it is the tax withheld on your W-2 plus any estimated payments you made. Where a refund is delayed, both systems pay interest on it. India pays half a percent a month under section 244A from the start of the assessment year or the date of payment, and the IRS pays a quarterly-set rate on refunds not issued within 45 days of the filing deadline. In both cases that interest is taxable income in the year received, which people routinely forget to declare. A persistently large refund also means you over-withheld all year and lent the money at a rate well below anything else available to you.

section 244A pays half a percent a month on a refund, computed on whole months

R: Refund
m: Months

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

over-withheld through the year

Total tax liability: ₹1,45,000
TDS deducted: ₹1,68,000
Advance tax paid: ₹0
Self assessment tax paid: ₹0
TCS collected: ₹12,000
Months since filing: 4
Interest on refunds, annual: 6%

Refund due₹35,000

TDS of 1,68,000 plus TCS of 12,000 is 1,80,000 against a liability of 1,45,000, so 35,000 comes back, and section 244A adds 0.5% a month for 4 months, which is 700.

Open this example

under-withheld means tax is payable

Total tax liability: ₹2,00,000
TDS deducted: ₹1,68,000
Advance tax paid: ₹0
Self assessment tax paid: ₹0
TCS collected: ₹0
Months since filing: 0
Interest on refunds, annual: 6%

Refund due₹0

boundary

Open this example

exact payment leaves nothing either way

Total tax liability: ₹1,68,000
TDS deducted: ₹1,68,000
Advance tax paid: ₹0
Self assessment tax paid: ₹0
TCS collected: ₹0
Months since filing: 4
Interest on refunds, annual: 6%

Refund due₹0

degenerate case

Open this example

Method and limits

What it assumes

Interest computed on whole months.

What it deliberately does not model

Both systems attach conditions to refund interest, including no interest where the delay is attributable to you.
Refunds can be set against outstanding demands from earlier years.
US refund interest runs only from 45 days after the filing deadline, so an on-time refund carries none.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

Does the tax authority pay interest on my refund?: If it is late, yes. India pays half a percent a month under section 244A, subject to conditions. The IRS pays interest on refunds not issued within 45 days of the filing deadline, at a rate it resets quarterly. Either way it is taxable income when you receive it.
Is a large refund good?: It means you overpaid through the year and lent the money at a poor rate, or at no rate at all. Adjusting your withholding is usually better than collecting a refund.