Many of us are horrible at receiving compliments. We don't know what to do or say. It makes us feel arrogant and uncomfortable. It brings too much attention to us that we try to dilute the compliment in some way.
Some dismiss the compliment or find a way to deflect it.
In many cases it's good ol' self-doubt and the sense of being an impostor: you know more about yourself than other people, and the compliment portrays a positive picture of you that doesn't sound or - more importantly - feel like the whole you.
It feels dishonest to accept it as truth. You want to reveal something about yourself that others don't know so you can feel comfortable knowing they now know the compliment isn't true.
It feels more genuine to give context to the compliment. You're not as good as what others make you out to be.
But there are 3 points worth noting about compliments:
1- Compliments are gifts other people offer you to make you feel appreciated, and turning them down makes them feel awkward, too. Let's just face it: social interactions are usually very awkward and we're bound to screw something up, but we CAN get better at them. One way to do that is to make others feel comfortable, especially when they're expressing positive sentiments. We WANT more positivity in social interactions, so we shouldn't discourage such positive behaviors.
2- Most compliments are true or have an element of truth. They may not be the whole truth, but there's a seed of truth you can nurture and help grow. Accept the compliment and work with it. Aspire to live up to people's positive expectations.
3- Personal development is your own project. Others may not be as invested in it as you would like, or expect, them to be. You don't need to reveal your flaws so people can know the truth about you. That's a truth you work on. It doesn't mean you become hypocritical and lead a double life, but it does mean that you don't have to reveal everything to others, especially when the situation doesn't call for it.
You can accept compliments, give them space and attention, make sure they are appreciated, then build on them by complimenting in return, acknowledging others deserving of appreciation, and so on.
The interaction should be: "Thank you for the gift. And also..." rather than: "Please take this back. I don't deserve it."
Did I tell you you're looking beautiful today? Well, you do. ;)