NEW DELHI – In a significant move to address growing passenger grievances, the Director General of Civil Aviation (DGCA) has issued a revised set of Civil Aviation Requirements (CAR) aimed at streamlining the airline ticket refund process. The new regulations, effective from March 26, 2026, establish strict benchmarks for how airlines handle cancellations, credit shells, and tax refunds.
Key Highlights of the New Refund Policy
The updated CAR (Section 3, Series ‘M’, Part II) introduces several “minimum benchmarks” to protect travelers from restrictive commercial practices.
1. Mandatory 48-Hour ‘Look-In’ Option
Airlines must now provide a 48-hour “Look-in option” after a booking is made. This allows passengers to cancel or amend their tickets without any additional charges, provided the request is made within this window.
Exceptions: This facility is not available for domestic flights departing within 7 days or international flights departing within 15 days of the booking date when booked via the airline website.
2. Strict Timelines for Refunds
The DGCA has set definitive deadlines for returning money to passengers based on the mode of payment:
- Timeline for Credit Cards: Refund must be processed within 7 days.
- Timeline for Cash: Refund must be made immediately from the point of purchase.
- Timeline for Agents/Portals: Must be completed within 14 working days.
- Look-in Option: Free cancellation or amendment within 48 hours of booking (subject to lead time).
- Charge Caps: Cancellation fees cannot exceed the basic fare plus fuel surcharge.
- Tax Refunds: Mandatory refund of UDF, ADF, and PSF even on non-refundable fares
3. Caps on Cancellation Charges
Under the new rules, airlines are strictly prohibited from charging cancellation fees that exceed the basic fare plus the fuel surcharge. Additionally:
Statutory Taxes: Airlines must refund all statutory taxes and fees (UDF, ADF, and PSF) even on non-refundable or promo fares.
No Processing Fees: Airlines are barred from levying any additional charges specifically for processing a refund.
Name Corrections: No charges can be levied for correcting a name (for the same person) if the error is reported within 24 hours of booking.
Ending the “Credit Shell” Default
A major point of contention has been the practice of airlines automatically moving refund amounts into a “credit shell” for future travel. The DGCA has now ruled that holding funds in a credit shell is the prerogative of the passenger and cannot be the default practice of the airline.
Medical Emergencies and Fitness to Travel
In cases of medical emergencies where a passenger or a family member on the same PNR is hospitalized, airlines may offer a refund or a credit shell. For other health-related cancellations, refunds will be issued based on a “fitness to travel” certificate from a DGCA-empanelled Aerospace Medicine specialist.
“While the Government is committed not to interfere in commercial practices, the volume of complaints necessitates affirmative action to safeguard the traveling public,” the DGCA stated in the notification.
The new rules apply to all scheduled domestic, non-scheduled, and foreign carriers operating to and from India. Foreign carriers must refund tickets according to their country of origin’s regulations but must adhere to the Indian mode of refund (timelines) for credit card and cash transactions