diff --git a/razorpay/resources/payment.py b/razorpay/resources/payment.py
index ee5e3130..ad274fee 100644
--- a/razorpay/resources/payment.py
+++ b/razorpay/resources/payment.py
@@ -49,20 +49,37 @@ def capture(self, payment_id, amount, data={}, **kwargs): # nosemgrep : python.l
         data['amount'] = amount
         return self.post_url(url, data, **kwargs)
 
-    def refund(self, payment_id, amount, data={}, **kwargs):  # pragma: no cover # nosemgrep : python.lang.correctness.common-mistakes.default-mutable-dict.default-mutable-dict
+    def refund(self, payment_id, data_or_amount=None, data=None, **kwargs):
         """
         Refund Payment for given Id
 
         Args:
             payment_id : Id for which payment object has to be refunded
-            amount : Amount for which the payment has to be refunded
+            data_or_amount : Either the refund amount (int, float, str) or a dictionary
+                             containing refund parameters (e.g. amount, notes, speed, receipt)
+            data : Optional dictionary of refund options when amount is passed as positional argument
+            **kwargs : Additional arguments including keyword 'amount' or request options
 
         Returns:
             Payment dict after getting refunded
         """
         url = "{}/{}/refund".format(self.base_url, payment_id)
-        data['amount'] = amount
-        return self.post_url(url, data, **kwargs)
+
+        payload = {}
+        if isinstance(data_or_amount, dict):
+            payload.update(data_or_amount)
+        elif data_or_amount is not None:
+            payload['amount'] = data_or_amount
+
+        if isinstance(data, dict):
+            payload.update(data)
+        elif data is not None and 'amount' not in payload:
+            payload['amount'] = data
+
+        if 'amount' in kwargs:
+            payload['amount'] = kwargs.pop('amount')
+
+        return self.post_url(url, payload, **kwargs)
 
     def transfer(self, payment_id, data={}, **kwargs):
         """
@@ -116,16 +133,6 @@ def upi_transfer(self, payment_id, data={}, **kwargs):
         """
         url = "{}/{}/upi_transfer".format(self.base_url, payment_id)
         return self.get_url(url, data, **kwargs)
-    
-    def refund(self, payment_id, data={}, **kwargs):
-        """
-        Create a normal refund
-
-        Returns:
-            Payment dict after getting refund
-        """
-        url = "{}/{}/refund".format(self.base_url, payment_id)
-        return self.post_url(url, data, **kwargs)
 
     def fetch_multiple_refund(self, payment_id, data={}, **kwargs):
         """
@@ -139,7 +146,7 @@ def fetch_multiple_refund(self, payment_id, data={}, **kwargs):
 
     def fetch_refund_id(self, payment_id, refund_id, **kwargs):
         """
-        Fetch multiple refunds for a payment
+        Fetch a specific refund by ID for a payment
 
         Returns:
             Refund dict
diff --git a/tests/test_client_payment.py b/tests/test_client_payment.py
index 0440f94f..ea94a2de 100644
--- a/tests/test_client_payment.py
+++ b/tests/test_client_payment.py
@@ -52,6 +52,8 @@ def test_refund_create(self):
                       match_querystring=True)
         self.assertEqual(self.client.payment.refund(self.payment_id, 2000),
                          result)
+        request_body = json.loads(responses.calls[0].request.body)
+        self.assertEqual(request_body, {'amount': 2000})
 
     @responses.activate
     def test_transfer(self):
@@ -116,7 +118,64 @@ def test_payment_refund(self):
         url = '{}/{}/refund'.format(self.base_url, 'fake_refund_id')
         responses.add(responses.POST, url, status=200, body=json.dumps(result),
                       match_querystring=True)
-        self.assertEqual(self.client.payment.refund('fake_refund_id',init), result)            
+        self.assertEqual(self.client.payment.refund('fake_refund_id',init), result)
+        request_body = json.loads(responses.calls[0].request.body)
+        self.assertEqual(request_body, {"amount": "100"})
+
+    @responses.activate
+    def test_payment_refund_with_amount_and_options(self):
+        result = mock_file('fake_refund')
+        url = '{}/{}/refund'.format(self.base_url, self.payment_id)
+        responses.add(responses.POST, url, status=200, body=json.dumps(result),
+                      match_querystring=True)
+        options = {'speed': 'normal', 'receipt': '#rec_1'}
+        self.assertEqual(
+            self.client.payment.refund(self.payment_id, 2000, options),
+            result
+        )
+        request_body = json.loads(responses.calls[0].request.body)
+        self.assertEqual(request_body, {'amount': 2000, 'speed': 'normal', 'receipt': '#rec_1'})
+        # Ensure caller's dictionary was not mutated in-place
+        self.assertEqual(options, {'speed': 'normal', 'receipt': '#rec_1'})
+
+    @responses.activate
+    def test_payment_refund_with_keyword_amount(self):
+        result = mock_file('fake_refund')
+        url = '{}/{}/refund'.format(self.base_url, self.payment_id)
+        responses.add(responses.POST, url, status=200, body=json.dumps(result),
+                      match_querystring=True)
+        self.assertEqual(
+            self.client.payment.refund(self.payment_id, amount=3000),
+            result
+        )
+        request_body = json.loads(responses.calls[0].request.body)
+        self.assertEqual(request_body, {'amount': 3000})
+
+    @responses.activate
+    def test_payment_refund_with_keyword_amount_and_data(self):
+        result = mock_file('fake_refund')
+        url = '{}/{}/refund'.format(self.base_url, self.payment_id)
+        responses.add(responses.POST, url, status=200, body=json.dumps(result),
+                      match_querystring=True)
+        self.assertEqual(
+            self.client.payment.refund(self.payment_id, amount=3000, data={'speed': 'optimum'}),
+            result
+        )
+        request_body = json.loads(responses.calls[0].request.body)
+        self.assertEqual(request_body, {'amount': 3000, 'speed': 'optimum'})
+
+    @responses.activate
+    def test_payment_refund_without_arguments(self):
+        result = mock_file('fake_refund')
+        url = '{}/{}/refund'.format(self.base_url, self.payment_id)
+        responses.add(responses.POST, url, status=200, body=json.dumps(result),
+                      match_querystring=True)
+        self.assertEqual(
+            self.client.payment.refund(self.payment_id),
+            result
+        )
+        request_body = json.loads(responses.calls[0].request.body)
+        self.assertEqual(request_body, {})
 
     @responses.activate
     def test_payment_fetch_multiple_refund(self):