Taxpayers across India are facing significant and unusual delays in receiving their income-tax refunds for the current assessment year. Professionals in the tax field have raised alarms about extended processing times, even for straightforward tax returns. Official data from the Central Board of Direct Taxes (CBDT) paints a stark picture: personal income-tax refunds issued by early November stand at just Rs 88,548 crore, a dramatic drop from Rs 1.42 lakh crore disbursed during the same period last year.
What the Numbers Reveal
The total refund outflow up to November 10 is a little over Rs 2.42 lakh crore, marking an 18% decline compared to the previous year. This slowdown has caused widespread concern among both individual taxpayers and tax advisors. CBDT Chairman Ravi Agrawal, addressing the issue on November 17, acknowledged the delays. He stated that low-value refunds are being released, but the department has identified instances of incorrect refund or deduction claims, leading to a more rigorous verification process. He expressed hope that remaining refunds would be cleared by December.
Root Causes of the Refund Gridlock
Tax experts point to a confluence of factors creating this bottleneck. A primary reason was the delayed release of Income Tax Return (ITR) forms for Assessment Year 2025-26. Karanjot Singh Khurana, Partner at Lakshmikumaran & Sridharan Attorneys, provided specific dates: the common utility for ITR 1 to 4 was released on June 11, 2025, compared to April 1, 2024. Similarly, ITR 2 came out on July 11 versus April 1 last year. This late start pushed back the entire filing and processing cycle.
Beyond timing, there is a clear trend of heightened scrutiny. High-value refunds, typically those above Rs 30,000-35,000, are facing the most pronounced delays. CA Ashish Niraj of A S N & Company noted that about 80% of such refunds for their clients are pending, whereas smaller refunds are often processed within a month. The department has intensified verification, especially for returns claiming large Tax Deducted at Source (TDS) refunds or involving the carry-forward of losses.
OP Yadav, former Principal Commissioner of Income Tax, explained that refunds appearing disproportionate to the taxes paid are frequently routed through system-based risk checks. This includes many salaried individuals where substantial refunds arise from TDS deducted by employers, often due to employees not submitting Form 12BB on time.
The AIS Conundrum: Double Reporting Creates Confusion
A significant technical issue complicating the process is related to the Annual Information Statement (AIS). Experts report that the same income is sometimes reported from multiple sources, creating false red flags. For instance, in property sales, data may come from both the TDS deducted by the buyer (Form 26QB) and the property registrar's office, making it appear as if the transaction value is double the actual amount.
CA Aastha Gupta of S.K. Gulati & Associates acknowledged that while AIS improves accuracy, such double reporting contradicts the capital gains reported in the ITR and increases the workload for professionals. However, she believes these mismatches are not a major driver of refund delays at the Centralised Processing Centre (CPC) stage.
Legal and Procedural Concerns Emerge
The delays are raising legal questions. Ritika Nayyar, Partner at Singhania & Co, expressed concern that refunds are being held without proper "speaking orders" or official reasoning, which may contravene statutory safeguards. She argued that interest under Section 244A is insufficient compensation for unjustified delays and that courts are justified in awarding additional compensation.
Some experts also suggest broader budgetary pressures may be influencing refund outflows. The 38% year-on-year drop in personal refund issuance hints at a cautious approach by authorities managing collection targets. Furthermore, the sheer volume of filings—over 8 crore returns for AY 2025-26 by November end—combined with deadline extensions, has strained the CPC's processing capacity.
What Taxpayers Should Do Now
To avoid further delays, professionals recommend a meticulous approach:
- Reconcile meticulously: Match all income, TDS, and deduction details with AIS, TIS, and Form 26AS before filing.
- Ensure accuracy: Select the correct ITR form, report all income (including exempt income), and validate deductions with proper documentation.
- Complete e-verification: Do this within 30 days of filing to prevent invalidation.
- Pre-validate bank accounts: Ensure the refund account is correctly linked and validated on the e-filing portal.
- Respond promptly: Address any notice from the department immediately.
While a refund status tracker exists on the e-filing portal, experts like Khurana advocate for a more comprehensive, real-time system to show processing timelines and reduce taxpayer anxiety.
Is This Delay the New Normal?
Opinions are divided on whether this pattern will continue. Some, like Khurana, view this year's issues as circumstantial, driven by major form changes, and expect a smoother process next year. Others, like Yadav, see a more structural shift towards risk-based verification and careful refund management, suggesting delays for high-value cases may persist. CA Ashish Niraj offers a longer-term optimistic view, suggesting that as more taxpayers adopt the new tax regime, such disputes may naturally decline.
