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The paper describes a hardware efficient interpolation filter for portable digital audio applications. The design of the filter is based on merged delay transformation (MDT). Existing MDT based interpolator is efficient in terms of power consumption but its performance drastically degrades in terms of area. The proposed modified MDT interpolator is efficient in terms of both area and power consumption. The comparison of the modified architecture with the original MDT interpolator, existing polyphase FIR and cascaded IIR based interpolators is presented. The significant reduction in area and power consumption makes the modified architecture as a potential candidate for area critical and power efficient digital audio applications.