Airline refund rules change: DGCA caps charges, mandates quick payouts for passengers

Air passengers cancelling tickets will now get faster refunds without extra processing charges, as new rules issued by the Directorate General of Civil Aviation (DGCA) come into force from March 26, 2026. The move aims to address rising complaints over delays, deductions and forced credit shells by airlines.

The regulator said refund-related grievances have become a “major source of complaint,” with no improvement despite multiple discussions with airlines, prompting the government to set minimum benchmarks.

No fee on refunds, strict timelines introduced

Under the new norms, airlines cannot charge any additional fee for processing refunds. Clear timelines have been mandated:

• Refunds must be issued within seven days for credit card payments
• Immediate refunds are required for cash bookings at the airline’s office
• For tickets booked via travel agents or portals, airlines must ensure refunds within 14 working days

The DGCA clarified that the responsibility for refunds lies with airlines even when tickets are booked through intermediaries.

No forced credit shells, full refund visibility mandated

Airlines can no longer compel passengers to keep refund amounts in credit shells. Instead, they must offer it as an option.

Refunds must also include all applicable charges such as taxes, user development fee (UDF), airport development fee (ADF), and passenger service fee (PSF), even for non-refundable or promotional fares in cases of no-show, non-utilisation, or cancellations.

Additionally, airlines must clearly display refund amounts with a detailed break-up on tickets or separate documents, and publish refund policies on their websites.

48-hour free cancellation window with conditions

Passengers can cancel or amend tickets within 48 hours of booking without additional charges, except fare differences for new bookings.

However, this “look-in option” is not available if the flight departs within:

• 7 days for domestic travel
• 15 days for international travel

Beyond 48 hours, airline-specific cancellation charges will apply.

Cap on cancellation charges and transparency push

The DGCA has capped cancellation charges, stating airlines cannot levy fees exceeding the basic fare plus fuel surcharge. This excludes disclosed agent fees.

Airlines must prominently display cancellation charges at the time of booking to improve transparency.

Key grievances targeted by new rules

The revised framework seeks to address:

• Delays in refund processing
• Disputes over refund amounts
• Practice of adjusting refunds against future bookings with limited validity

The DGCA noted that increasing complaint volumes made regulatory intervention necessary.

Special provisions for medical cases and name corrections

Passengers cancelling due to medical emergencies involving themselves or family members on the same PNR will be eligible for either a refund or a credit shell.

In other medical cases, refunds will be processed after assessment by an airline or DGCA-approved aerospace medicine specialist.

Airlines are also barred from charging for correcting spelling errors in passenger names if reported within 24 hours of booking through airline websites.

Rules apply across domestic and international operations

The guidelines cover both domestic and international tickets booked with airlines operating to and from India. Foreign carriers must follow refund norms of their country of origin.

Seat fee transparency

Separately, the government has asked airlines not to charge seat selection fees for up to 60% of seats on domestic flights, and to ensure passengers on the same PNR are seated together. Currently, around 20% of seats are free.

According to a PTI report, airlines have been charging between Rs 200 and Rs 2,100 for seat selection.