Tax Refund Compensation Calculator

Where a refund due to a taxpayer is not paid within 3 months of the date it becomes due, the Commissioner must pay compensation at KIBOR plus 0.5 per cent a year on the refund, for the period from the end of those 3 months to the date it is paid (s.171(1)). A refund becomes due on the date the refund order is made; for a refund that follows an appeal order, on the date the Commissioner receives that order; for one that follows a revision order under section 122A, on the date that order is made (s.171(2)). Where the refund order is made on an application under section 170(1), it is due from the date of that order, not from the date the return was treated as an assessment (Explanation to s.171(2)). In the example the refund ordered on 15 January 2026 earns nothing up to 15 April 2026, and counts 168 days from 16 April 2026 to 30 September 2026.

The rate moves with KIBOR, quarter by quarter

KIBOR is the Karachi Inter Bank Offered Rate prevalent on the first day of each quarter of the financial year (s.2(30AB)). The Ordinance does not name the tenor; enter the offer rate published for the first day of each quarter (1 July, 1 October, 1 January, 1 April), or the last one published before it where that day had no fixing. For a payment still to come, a quarter's rate is not yet known and the result is a projection. The example’s days fall in 2 quarters, so each part is worked at its own quarter’s KIBOR. The rate has changed: footnotes to section 171(1) record KIBOR before the Finance Act 2012, fifteen per cent from it, and KIBOR plus 0.5 per cent from the Finance Act 2015, so the page works out compensation for days from 1 July 2015.

Late filers and tax on the compensation

A person not on the Active Taxpayers' List because the return was filed late is not issued a refund while off the list, is not entitled to compensation under section 171, and the period off the list is not counted in working it out (s.182A(1)(c), (d)). The page leaves the days off the list out of the count; whether any compensation is due at all for such a person is not settled by the text. The compensation is itself income: additional payment on a delayed refund is taxed under the head Income from Other Sources (s.39(1)(cc)).

Claiming the refund

A refund application must be made within three years of the later of the assessment order for the year and the date the tax was paid (s.170(2)(c)); the Commissioner must decide it by an order within sixty days, after providing the taxpayer an opportunity of being heard (s.170(4)), and a failure to decide can be appealed (s.170(5)). From tax year 2021 FBR may also issue a refund without an application, to the extent its system verifies the tax credit (s.170A). Where there is reason to believe the refund claimed is not admissible, no compensation is payable until the investigation is completed and the claim accepted or rejected (proviso to s.171(1)); the text does not say whether, once the claim is accepted, compensation then covers the investigation period.

Where this stops

The page counts the 3 months to the same date 3 months later (the last day of that month where it has no such date), counts each day after that up to and including the payment date, charges each day at the KIBOR of the quarter it falls in, over a 365-day year, and rounds once to the nearest rupee at the end (s.219). These are the page's readings: the Ordinance does not spell out the day count, the year basis or the quarter-by-quarter rate. For a refund issued without an application (s.170A), the page reads the due date as the date it was sanctioned. A refund paid through income tax refund bonds under section 171A is outside this calculation (the bonds carry their own profit). Not sure a refund is due? Start with the tax refund calculator.