Budget 2026: The countdown to Budget 2026 has started. As this important day is approaching, the eyes of crores of taxpayers of the country are fixed on the Finance Minister’s purse. Like every time, there is an expectation of change in the tax slabs, but this time there is an issue which has sparked a new and serious debate among taxpayers and tax experts. This issue is of ‘equality of interest’. The huge delay in refunds this year has turned this demand into a movement. The question is simple, when the taxpayer delays in paying tax, he has to pay heavy penalty, but when the government delays in giving refund, then why is the interest rate so low?
Stuck money of 50 lakh taxpayers
Delay in tax refund has emerged as the biggest headache for taxpayers this financial year. About 50 lakh taxpayers are still waiting for their refunds to be processed. These are not just figures, but the hard-earned money of those middle class families and small businessmen, which they had planned for their household needs or business cash flow.
The government has also admitted that there has been a delay in some cases for assessment year 2025-26. The reasoning behind this is that to prevent fraud, checks have been tightened on the backend. Data from AIS (Annual Information Statement) and TIS are being matched to prevent wrong refund claims. This step of the government may be necessary for revenue security, but taxpayers say that if there is a delay in the name of investigation, then its compensation or compensation should also be appropriate.
Double standard of interest, taking 12%, giving only 6%
At the root of this entire controversy are the rules of the Income Tax Act, which currently seem to be tilted in favor of the government. There is a big contradiction in the existing rules. Tax experts are calling it ‘inequality’.
Chartered Accountant Dr. Suresh Surana explains this mathematics and says that under the Income Tax Act, interest rates have been fixed separately for the taxpayer and the government. If a common man defaults in filing his return, paying advance tax or paying self-assessment tax, then he has to pay interest at the rate of 1% per month i.e. 12% per annum under sections 234A, 234B and 234C. On the other hand, when the government issues delayed refund under Section 244A, it pays interest to the taxpayer only at the rate of 0.5% per month i.e. 6% per annum. It is expected from Budget 2026 that the government will eliminate this huge gap and rationalize interest rates.
what does the law say
If we go deeper into the rules, the situation becomes more clear. According to Section 244A, 6% simple interest is available on the refund only if the refund amount is more than 10% of your total tax liability. If you have filed the return on time, interest is calculated from April 1 to the date of receipt of refund. But if you delay in filing the return, interest will start from the date of filing the return.
Here is another catch which stings the common man, the interest you get on the refund is also taxable. That is, first the interest was less, and then tax had to be paid on that too. On the contrary, you cannot claim any deduction or rebate on the 12% interest you pay to the government on delay. This one-sided system frustrates honest taxpayers.
Rules expected to change in Budget 2026
Experts believe that this framework imposes unnecessary burden on compliant taxpayers. Especially in years when refunds are delayed due to system glitches or administrative checks. Taxpayers argue that when the filing is done on time, the responsibility for the delay lies with the department and not the citizen.
The biggest expectation from the upcoming budget is that the government should remove this discrepancy to win the trust of the taxpayers. If equality in interest rates is brought in Budget 2026, it will provide relief to millions of taxpayers.