By BillCut
Last updated: 3 November 2026
Interest on income tax refund is taxable under which head is a question many filers ask after a refund arrives with an interest amount. What we could confirm from the e-Filing portal is this: its ITR-1 user manual lists “Interest from Income Tax Refund” under other sources of income. We could not open a portal page that states the exact provision, so no section number is given here.
What did the portal confirm?
The File ITR-1 (Sahaj) Online user manual lists items counted as other sources. They include savings account interest, deposit interest from banks, post offices or cooperative societies, interest on enhanced compensation, family pension and interest from income tax refund. The same manual refers to other sources as covering interest income and family pension.
What could not be confirmed?
These points were not verified from incometax.gov.in pages that opened:
- The exact section that makes refund interest taxable under the Income-tax Act, 1961.
- The matching provision under the Income-tax Act, 2025, which replaces the 1961 Act from 1 April 2026.
- Any rule on tax deducted at source on this interest.
- The year in which the interest is taxed.
Please check the official portal or a chartered accountant for these points, and do not rely on section numbers quoted elsewhere.
How does it work in practice?
If the portal lists the interest under other sources, it is added to your other income and taxed at your slab rate. Here is an illustrative example, not real figures for any person.
| Item | Illustrative amount |
|---|---|
| Refund interest received | Rs 500 |
| Assumed slab rate | 20 percent |
| Tax on this interest, before any cess | Rs 100 |
The slab rate, and whether any cess or other tax applies, depend on your own return. Confirm with the portal or a chartered accountant.
Where do you report it?
Use the ITR form that applies to you and check that form’s other sources section on the portal. The ITR status user manual shows how to view the filed return and the intimation order, which lists amounts processed. For a basic walk through, read filing income tax online in India. You can also compare apps for filing ITR and tax saving with fintech tools.
Does the refund itself count as income?
The portal pages reviewed describe the refund status and bank credit, not tax treatment of the refund amount. Check the portal for guidance. For where refunds are tracked, see the Refund Status user manual and the e-Filing portal.
Why is this question hard to answer from memory?
Tax law is moving from the Income-tax Act, 1961 to the Income-tax Act, 2025 from 1 April 2026. Section numbers, wording and schedule names can differ between the two. Articles written before the change may quote old numbers, and some online posts quote them without checking. Treat any section number you read as unconfirmed until you see it on the official portal.
What can you do today?
- Download your intimation order and note the refund and the interest amount.
- Open the ITR form for your category and read its other sources section.
- Ask a chartered accountant to confirm the head, the provision and the year of taxation.
If the refund interest arrives while you are managing several loan EMIs, keep a note of the amount for your return and speak with your adviser.
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How BillCut can help
BillCut is a balance transfer and debt reduction platform. It works with lending partners to help eligible borrowers move high interest dues, such as credit card balances and personal loan EMIs, into one structured EMI. BillCut earns from helping borrowers refinance, so it has an interest in this option. Approval and terms depend on the partner lender.
Frequently asked questions
Interest on income tax refund is taxable under which head?
The portal ITR-1 manual lists interest from income tax refund under other sources. Confirm the exact provision on the official portal or with a chartered accountant.
Which section covers refund interest?
We could not verify the section from the portal pages that opened. Check the official portal or a chartered accountant, for both the 1961 Act and the 2025 Act.
Does the Income-tax Act 2025 change the head?
We could not confirm this. The 2025 Act replaces the 1961 Act from 1 April 2026, so check the portal for the matching provision.
How is it taxed?
If treated as other sources income, it is added to your other income. The rate depends on your total income and slab, so check your own return.
Is TDS deducted on it?
This was not verified. Check the official portal or your intimation order and ask a chartered accountant.
Where do I see the interest amount?
Open View Filed Returns on the portal and download the intimation order, which shows what was processed for your return.
Should I report it if the amount is small?
Ask a chartered accountant. The portal lists it among other sources items, so do not skip it without advice.
Disclaimer: This article is general information, not tax, legal or financial advice. Rules can change, especially with the move to the Income-tax Act, 2025, so confirm details on the official portal or with a chartered accountant. Loan approval and terms depend on the partner lender.
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