Income tax refunds for Financial Year (FY) 2024-25 (Assessment Year 2025-26) are experiencing delays due to a combination of factors, including operational challenges, stricter verification processes, and taxpayer-related issues. Many taxpayers who filed their returns early are still awaiting their refunds, leading to concern.
Key reasons for the delays include
Late Release of ITR Forms
A significant factor contributing to delays was the late release of Income Tax Return (ITR) forms for AY 2025-26. For instance, the common utility for ITR 1 to 4 was released on June 11, 2025, compared to April 1, 2024, in the previous year. Similarly, ITR 2 was released on July 11, 2025, and ITR 6 on August 14, 2025, both considerably later than the previous year. This delay in form availability pushed back the entire return filing and refund processing timeline.
Increased Verification Checks and Scrutiny
The Central Board of Direct Taxes (CBDT) has introduced new and stricter verification measures, extending the processing time for many taxpayers. High-value refund claims and returns with aggressive deductions or exemptions are subject to additional scrutiny and "risk management" checks. This includes automated checks and validations for high-value claims.
Processing Constraints at Centralised Processing Centre (CPC)
The Centralised Processing Centre (CPC) is facing processing bottlenecks, especially for cases involving high value or significant deductions.
High Volume of ITR Filings
The Income Tax Department received a significantly higher number of returns for FY 2024-25, particularly from salaried taxpayers and small businesses. This surge has increased processing time and slowed down refund issuance.
Mismatches in Details
Discrepancies between ITR data and information in Form 26AS or the Annual Information Statement (AIS), or TDS mismatches, trigger additional verification checks and can delay processing.
Income Tax Portal Issues
Updates and occasional slow performance of the e-filing portal can affect return processing.
Complex Income
Returns from taxpayers with complex income, such as capital gains, multiple income sources, or large deductions, take longer to process due to extra checks.
Taxpayer Errors and Compliance Issues
Incorrect or Unvalidated Bank Account Details:
Refunds cannot be issued if the bank account is not pre-validated, has incorrect details (like IFSC code or account number), or if the name in the bank account does not match PAN records.
Failure to E-Verify ITR:
Refunds are processed only after the return is e-verified by the taxpayer within 30 days of filing. Failure to do so can lead to delays or the return being treated as invalid.
Outstanding Demand from Previous Year:
Refunds can be adjusted or withheld under Section 245(2) if there are pending tax demands from previous years.
Non-response to Departmental Communication:
The CBDT's 'Nudge' campaign proactively alerts taxpayers to discrepancies via SMS and email. Refunds linked to such cases are held back until the taxpayer responds and resolves the issues. While the Income Tax Department has until December 31, 2026, to process returns filed for FY 2024-25, most straightforward refunds are typically processed within 3-4 months once discrepancies are resolved. However, returns requiring verification or flagged under campaigns may take longer. The department pays interest on delayed refunds at 0.5% per month on the refund amount under Section 244A of the Income Tax Act if the delay extends beyond the statutory period.