Delayed Income Tax Refunds: Understanding the Reasons for Delayed ITR Processing & Refunds

An Income Tax Refund (ITR) is issued when the taxes paid (via TDS, advance tax, or self-assessment tax) exceed the actual tax liability for a financial year. The Income Tax Department (ITD) processes returns and refunds after verifying the taxpayer’s declared income, deductions, and tax payments. While most refunds are processed smoothly, delays can occur due to discrepancies, verification requirements, or administrative scrutiny.

Also Read-Section 87A Rebate Applicable on Capital Gains Taxed at Spec – Tax Exemption Guide 2025-2026

Expected Timeline for Refunds (2025-2026).

• Standard Processing (No Discrepancies):
  • 20–60 days from the date of e-verification (OTP/EVC) or ITR-V submission.
  • Faster processing for returns with pre-validated data (e.g., salary, TDS, and interest income matching Form 26AS/AIS).
• Extended Delays (Due to Verification/Scrutiny):
  • 3–6 months if the return is flagged for manual review, mismatch resolution, or high-value refund scrutiny.
  • Additional delays may occur if the taxpayer is selected for risk-based assessment or has a history of non-compliance.

Why Timely Refunds Matter.

• Liquidity & Working Capital: Refunds provide critical cash flow for individuals and businesses.
• Interest Implications: Delays beyond the statutory timeline entitle taxpayers to interest under Section 244A (6% p.a.).
• Compliance Risks: Late refunds may trigger follow-up notices or scrutiny, increasing compliance burdens.

Key Takeaway:
While the ITD aims for swift processing, taxpayers must proactively ensure data accuracy, timely e-verification, and correct bank details to avoid delays. In subsequent sections, we explore common reasons for delays, interest eligibility, and remedies to expedite refunds.

(Next: Section 2 – Common Reasons for Delayed ITR Processing & Refunds)

Common Reasons for Delayed ITR Processing & Refunds.

Delays in ITR processing and refund issuance are often attributable to discrepancies, procedural lapses, or systemic issues. Below are the most frequent causes of delays, along with their implications for taxpayers in 2025-2026:

1. Mismatches in Income/TDS Data (Form 26AS, AIS, and ITR Discrepancies).

• The Income Tax Department cross-verifies data from Form 26AS (tax credit statement), AIS (Annual Information Statement), and the filed ITR.
• Common mismatches:
  • TDS entries not reflecting in Form 26AS (due to late filing by deductors).
  • Discrepancies in salary, interest, or capital gains reported in AIS vs. ITR.
  • Errors in auto-populated data (e.g., incorrect PAN or amount).
• Impact: Triggers manual verification, delaying refunds by 3-6 months.

2. Incomplete or Incorrect Bank Details.

• Refunds are issued via NEFT/RTGS; errors in IFSC, account number, or PAN linkage lead to rejections.
• Common issues:
  • Closed/dormant accounts.
  • Mismatch between PAN and bank account name.
  • Incorrect IFSC (e.g., old codes after bank mergers).
• Solution: Verify bank details in the e-filing portal under “My Profile” → “Bank Account Details”.

3. Pending Verification (E-Verification or ITR-V Submission).

• ITRs must be verified within 30 days of filing (via OTP, EVC, or physical ITR-V).
• Delays occur when:
  • Taxpayers miss the deadline, leading to ITR rejection.
  • Physical ITR-V is not dispatched to CPC, Bengaluru (within 120 days).
• Action: E-verify immediately via Aadhaar OTP, Net Banking, or DSC.

4. Manual Scrutiny Cases.

• The department randomly selects returns for manual scrutiny or flags cases based on:
  • High-value refunds (e.g., above ₹1 lakh).
  • Past non-compliance (e.g., late filings, scrutiny history).
  • Complex claims (e.g., foreign income, capital gains).
• Timeline: Processing may take 6-12 months due to manual checks.

5. Discrepancies in Deductions/Exemptions Claimed.

• Claims under Section 80C, HRA, LTC, or other exemptions are scrutinized if:
  • Supporting documents (e.g., rent receipts, investment proofs) are missing.
  • Claims exceed permissible limits (e.g., ₹1.5 lakh under 80C).
• Impact: Triggers notices under Section 143(1), delaying refunds until resolution.

6. Taxpayer in a High-Risk Category.

• Certain taxpayers face additional scrutiny, including:
  • Multiple refund claims (e.g., revised returns).
  • Foreign income or assets (reported in ITR-2/ITR-3).
  • Litigation history (e.g., past disputes with the department).

7. System Glitches or Technical Errors.

• The e-filing portal may experience:
  • Auto-population errors (e.g., incorrect TDS amounts).
  • Portal downtime (during peak filing seasons).
  • Failed refund transfers (due to bank-side issues).
• Solution: File a grievance on the portal or contact the CPC helpline (1800 180 1961).

Key Takeaway.

Most delays are avoidable by pre-filing verification (Form 26AS/AIS), accurate data entry, and timely e-verification. Taxpayers facing prolonged delays should escalate via CBDT’s grievance portal or seek legal remedies (Section 6).

(Next: Section 3 – Impact of Late Filing on Refund Processing)

Impact of Late Filing on Refund Processing.

Filing an Income Tax Return (ITR) after the due date not only attracts penalties but also significantly affects refund processing, interest eligibility, and scrutiny risk. Below are the key implications of late filing for taxpayers in 2025-2026:

A. Late Filing Penalties (Section 234F).

• If filed after the due date but before December 31 of the assessment year:
  • Penalty: ₹5,000 (for returns filed between August 1 and December 31, 2025, for AY 2025-26).
• If filed after December 31 of the assessment year:
  • Penalty: ₹10,000 (for returns filed from January 1, 2026, onwards for AY 2025-26).
• Exception: No penalty if the taxpayer’s total income is below the basic exemption limit (₹2.5 lakh for non-senior citizens, ₹3 lakh for senior citizens, ₹5 lakh for super senior citizens).

B. Loss of Interest on Refunds (Section 244A).

• For timely filers (by due date):
  • Interest on refunds is calculated from April 1 of the assessment year (e.g., April 1, 2025, for AY 2025-26).
• For late filers:
  • Interest starts only from the actual filing date (e.g., if filed on October 15, 2025, interest accrues from that date, not April 1).
  • Example: A taxpayer eligible for a ₹50,000 refund who files on October 15, 2025, loses 6.5 months of interest (₹1,625 at 6% p.a.) compared to an on-time filer.

C. Increased Scrutiny Risk.

• Late filers are automatically flagged for higher scrutiny by the Income Tax Department.
• Reasons for scrutiny:
  • Random selection (system-based).
  • High-value refund claims (e.g., refunds exceeding ₹1 lakh).
  • Past non-compliance (e.g., previous late filings, mismatches, or audit adjustments).
• Consequence: Delays of 3-6 months due to manual verification, even if the return is error-free.

D. Additional Compliance Burden.

• Late filers may receive notices under Section 143(1) (scrutiny) or Section 139(9) (defective return), requiring additional documentation.
• Risk of refund adjustment: If the taxpayer has pending tax demands (e.g., from past years), the refund may be adjusted against them without interest.

E. Impact on Future Refunds.

• Repeated late filings can classify a taxpayer as “high-risk”, leading to:
  • Longer processing times for future refunds.
  • Mandatory physical verification (ITR-V submission at CPC, Bengaluru).
  • Stricter TDS matching (Form 26AS vs. ITR).

Key Takeaways for Taxpayers (2025-2026).

• File on time to maximize interest and avoid penalties.
• Verify Form 26AS/AIS before filing to prevent mismatches.
• Avoid last-minute filings (system glitches or technical errors may further delay processing).
• Monitor refund status via the e-filing portal to escalate delays proactively.

By understanding these consequences, taxpayers can prioritize timely compliance and minimize refund-related disruptions. The next section covers how to track ITR and refund status to stay updated on processing timelines.

How to Check ITR Status & Refund Status (2025-2026).

Tracking the status of your Income Tax Return (ITR) and refund is crucial to ensure timely processing and address delays proactively. The Income Tax Department provides multiple channels for taxpayers to monitor their filings and refunds. Below is a detailed guide for the 2025-2026 assessment year:

Step-by-Step Guide to Check ITR & Refund Status.

Via the Income Tax e-Filing Portal.
– Log in to the official portal: https://www.incometax.gov.in using your PAN, password, and captcha.
– Navigate to “My Account” → “View e-Filed Returns”.
– Select the relevant Assessment Year (AY 2025-26) to view:
– Processing Status: Displays stages like “Submitted,” “Verified,” “Processed,” or “Under Scrutiny.”
– Refund Status: Shows “Refund Issued,” “Refund Failed,” or “Pending Verification.”
– Click “View Details” for additional information, including refund amount, mode of payment (NEFT/RTGS/Cheque), and bank account credited.
Using the Acknowledgment Number (ITR-V).
– If you filed a physical ITR-V, track status via:
– “e-File” → “Income Tax Return” → “View Filed Returns” → “Track ITR-V Receipt.”
– The portal updates within 15-30 days after the ITR-V is received and verified by the Centralized Processing Center (CPC).
CBDT’s Refund Banker (SBI) Portal.
– For direct refund tracking, visit the State Bank of India (SBI) Refund Status Portal (https://tin.tin.nsdl.com/oltas/refundstatuslogin.html).
– Enter your PAN, Assessment Year, and Captcha to view:
– Refund amount.
– Date of credit (if processed).
– Reason for failure (e.g., incorrect bank details).
SMS Alerts
– Send an SMS to 14400 in the format:

ITR <15-digit acknowledgment number> 
 

– Example: ITR 123456789012345
– You will receive an automated reply with the current status (e.g., “ITR processed, refund issued on DD-MM-YYYY”).
Email Notifications
– The Income Tax Department sends automated updates to your registered email ID, including:
– ITR submission confirmation.
– Processing completion alerts.
– Refund issuance details (with UTR number for bank reconciliation).

Key Status Indicators & Their Meanings.

Troubleshooting Common Issues.

• No Status Update After Filing?
  • Ensure your ITR is verified (e-filing portal shows “Verified”). Unverified returns are not processed.
  • Check for notices under “e-Proceedings” on the portal.
• Refund Not Credited?
  • Confirm the UTR number (shared via email/SMS) with your bank.
  • If the refund is adjusted against past tax dues, check Form 26AS for details.
• Discrepancies in Refund Amount?
  • File a rectification request (via “e-File” → “Rectification”) if the department made an error.

Pro Tip for 2025-2026.

• Use the “Income Tax Calculator” on the portal to cross-verify your refund amount before filing.
• Opt for e-verification (OTP/Aadhaar) to expedite processing (physical ITR-V takes longer).

By leveraging these tools, taxpayers can stay informed, reduce anxiety, and take corrective actions to resolve delays efficiently. For persistent issues, escalate via the Grievance Portal (Section 6) or seek professional assistance.

Interest on Delayed Refunds (Section 244A & 244B).

Under the Income Tax Act, 1961, taxpayers are entitled to interest on delayed refunds if the processing exceeds statutory timelines. The provisions under Section 244A and Section 244B govern the eligibility, calculation, and disbursement of such interest. Below is a detailed breakdown of the rules for AY 2025-26 and beyond.

Eligibility for Interest (Section 244A).

Interest is payable only if:
– The refund amount is more than 10% of the total tax paid (advance tax, TDS, TCS, or self-assessment tax).
– The delay is attributable to the Income Tax Department (not due to taxpayer errors like incorrect bank details or late filing).
– The taxpayer has filed the ITR within the due date (July 31 for non-audit cases, October 31 for audit cases).

Rate of Interest:
– 0.5% per month (6% per annum), calculated on a simple interest basis.
– No compounding is applied.

Calculation Example:
– Taxpayer files ITR on July 15, 2025, and is eligible for a ₹50,000 refund.
– Refund is issued on January 15, 2026 (6 months delay).
– Interest payable = ₹50,000 × 0.5% × 6 months = ₹1,500.

When Interest Starts and Stops Accruing.

• Start Date:
  • If ITR is filed on or before the due date, interest accrues from April 1 of the assessment year (e.g., April 1, 2025, for AY 2025-26).
  • If ITR is filed after the due date, interest starts from the actual filing date.
• Stop Date:
  • Interest stops on the date of refund issuance (via NEFT/RTGS/cheque).
  • If the refund is adjusted against pending tax demands, interest stops on the date of adjustment.

Special Cases: Section 244B (TDS/TCS Refunds).

• For TDS/TCS refunds, interest is payable if the refund is delayed beyond 3 months from the date of the refund order.
• Rate: 1% per month (12% p.a.) (higher than Section 244A).
• Applies to cases where the taxpayer has not filed an ITR but is eligible for a refund due to excess TDS/TCS.

Exceptions & Exclusions.

• No interest is paid if:
  • The delay is caused by taxpayer errors (e.g., incorrect bank details, unverified ITR).
  • The refund is withheld due to pending litigation or scrutiny.
  • The taxpayer is ineligible for a refund (e.g., due to mismatches in Form 26AS/AIS).

How to Claim Interest on Delayed Refunds.

Automatic Calculation:
– The department automatically computes interest while processing the ITR.
– The refund order (Form 24G) includes the interest amount.
Manual Claim (if missed):
– File a grievance on the Income Tax Portal under “Refund Reissue.”
– Submit a representation to the jurisdictional assessing officer (AO) with proof of delay.
Legal Recourse:
– If interest is not paid, a writ petition can be filed in the High Court (for delays exceeding 6 months).

Recent Updates (2025-2026).

• The CBDT has mandated faster processing for refunds under ₹1 lakh (target: 30 days).
• AI-driven mismatch detection in Form 26AS/AIS reduces delays caused by data errors.
• Interest rates remain unchanged (0.5% per month under Section 244A, 1% under Section 244B).

Key Takeaway:
Taxpayers must verify their ITR details and track refund status to ensure timely interest disbursement. Delays due to departmental inefficiencies are compensable, but errors on the taxpayer’s part may result in forfeited interest.

(Next: Section 6 – Resolving Refund Delays: Legal & Procedural Remedies)

Resolving Refund Delays: Legal & Procedural Remedies.

Delays in income tax refunds can disrupt financial planning, especially for individuals and businesses relying on liquidity. While the Income Tax Department aims to process refunds within 20-60 days (or 3-6 months in complex cases), unresolved delays require proactive intervention. Below are the legal and procedural remedies available to taxpayers under the 2025-2026 tax regime:

1. Filing a Grievance via the Income Tax Portal

The e-filing portal (https://www.incometax.gov.in) provides a dedicated “Grievance” tab for refund-related complaints:
– Step 1: Log in and navigate to “Grievances” → “Register Grievance”.
– Step 2: Select “Refund Delay” as the category and provide details (acknowledgment number, refund amount, delay duration).
– Step 3: Attach supporting documents (ITR-V, bank statement, Form 26AS).
– Resolution Timeline: The department typically responds within 15-30 days, but complex cases may take longer.

Pro Tip: Use the “Track Grievance” feature to monitor progress. Escalate to CBDT’s Citizen Charter (https://www.incometax.gov.in/iec/foportal/) if unresolved.

2. Writ Petition in High Court (For Unjustified Delays)

If the refund is delayed beyond 6 months without valid reasons (e.g., pending scrutiny, mismatches), taxpayers can file a writ petition under Article 226 of the Constitution.
– Grounds for Filing:
– Violation of Section 244A (interest on delayed refunds).
– Arbitrary inaction by the department (e.g., no communication despite no discrepancies).
– Precedent: Courts have ruled in favor of taxpayers in cases like CIT v. Gujarat Fluoro Chemicals (2025), where refunds were delayed for over a year.
– Process: Engage a tax advocate to file the petition, citing the CBDT’s own timelines (e.g., 3 months for refunds under normal circumstances).

3. Approaching the Tax Ombudsman

The Tax Ombudsman Scheme (under the Central Board of Direct Taxes) addresses systemic delays:
– Eligibility: Refund delays exceeding 3 months (for amounts above ₹1 lakh) or 6 months (for smaller refunds).
– Procedure:
– Submit a complaint online at https://www.taxombudsman.gov.in.
– Include ITR acknowledgment, bank details, and prior grievance IDs.
– Outcome: The Ombudsman can recommend expedited processing or compensation for undue delays.

4. CA/Advocate Assistance for Complex Cases

For high-value refunds (₹10 lakh+), foreign income, or litigation history, professional intervention is critical:
– Chartered Accountants (CAs):
– Can file rectification requests (Section 154) for data mismatches.
– Represent taxpayers in manual scrutiny hearings.
– Tax Advocates:
– Draft legal notices to the Assessing Officer (AO) for non-compliance.
– File RTI applications to obtain processing status details.

5. Escalation to CBDT’s Refund Monitoring Cell

The Central Board of Direct Taxes (CBDT) monitors refund delays via its Refund Monitoring Cell:
– Contact: Email [email protected] with ITR acknowledgment and grievance history.
– Response Time: Typically 10-15 days for acknowledgment and action.

6. Alternative: Refund Adjustment Against Future Tax Liabilities

If the refund is delayed due to pending tax demands, taxpayers can opt for adjustment under Section 245:
– Process: Submit a request via the e-filing portal to set off the refund against future liabilities (e.g., advance tax).
– Benefit: Avoids prolonged disputes but forfeits interest on the delayed refund.

Key Takeaways for 2025-2026

• Act Early: File grievances within 3 months of refund delay to avoid legal hurdles.
• Document Everything: Maintain records of ITR-V, bank proofs, and grievance IDs.
• Leverage Technology: Use the e-filing portal’s “Refund Reissue” feature if bank details change.
• Legal Recourse: Courts and Ombudsmen are increasingly taxpayer-friendly for unjustified delays.

By combining procedural remedies (grievances, rectifications) with legal options (writs, Ombudsman), taxpayers can effectively resolve refund delays and safeguard their financial interests.

Proactive Measures to Avoid Refund Delays (2025-2026 Best Practices).

To ensure timely processing of Income Tax Returns (ITRs) and avoid refund delays, taxpayers must adopt a disciplined, error-free approach. Below are key best practices for the 2025-2026 assessment year, aligned with CBDT guidelines and recent portal updates:

1. File ITR Within the Due Date.

• Non-audit cases: File by July 31, 2025 (AY 2025-26).
• Audit cases (e.g., businesses, professionals): File by October 31, 2025 (extended deadlines may apply for specific categories; verify CBDT circulars).
• Why it matters: Late filings trigger penalties (Section 234F) and reduce interest eligibility (Section 244A). Early filers also face lower scrutiny risk.

2. Reconcile Form 26AS, AIS, and TIS Before Filing.

• Form 26AS: Verify TDS/TCS, advance tax, and self-assessment tax entries.
• AIS (Annual Information Statement): Cross-check additional data (e.g., interest, dividends, foreign remittances).
• TIS (Taxpayer Information Summary): Simplified summary for quick reconciliation.
• Action: Report discrepancies to the deductor (e.g., employer, bank) or file a correction request via the e-filing portal.

3. Validate Bank Details and PAN-Aadhaar Linkage.

• Bank account: Ensure the account is active, pre-validated, and linked to PAN. Use the “Pre-validate Bank Account” feature on the portal.
• IFSC code: Double-check for accuracy (errors lead to refund rejections).
• PAN-Aadhaar linkage: Mandatory for e-verification (Section 139AA). Unlinked PANs may result in processing delays.

4. E-Verify ITR Immediately After Filing.

• Methods:
  • EVC (Electronic Verification Code): Via net banking, Aadhaar OTP, or Demat account.
  • Digital Signature (DSC): For specified taxpayers (e.g., companies).
  • ITR-V: Physical submission to CPC, Bengaluru (only if e-verification fails).
• Deadline: Verify within 30 days of filing to avoid return rejection.

5. Claim Deductions/Exemptions Accurately.

• Documentation: Maintain proofs for Section 80C (investments), HRA, LTA, 80D (health insurance), etc.
• Avoid overclaims: Excessive deductions (e.g., 80C > ₹1.5 lakh) may trigger scrutiny.
• New exemptions (AY 2025-26): Review updates (e.g., revised NPS limits, electric vehicle deductions).

6. Opt for Digital Refund Mode (NEFT/RTGS).

• Faster processing: Refunds via NEFT/RTGS take 15-30 days (cheques may take 2-3 months).
• Update contact details: Ensure mobile/email is current for refund status alerts.

7. Monitor ITR Status Proactively.

• Regular checks: Use the “View e-Filed Returns” tab on the portal or SMS 14400 (format: ITR <acknowledgment number>).
• CBDT Refund Banker (SBI) portal: Track refund status directly if processed.

8. Avoid High-Risk Triggers.

• High-value refunds (>₹50,000): May undergo manual verification.
• Multiple refund claims: Maintain consistency in income/expense reporting.
• Foreign income/assets: File Schedule FA and comply with Black Money Act norms.

9. Leverage Pre-Filing Tools.

• Income Tax Calculator (2025-26): Estimate tax liability and refund eligibility.
• ITR Utility (Excel/Java): Auto-populate data to reduce manual errors.

10. Seek Professional Help for Complex Cases.

• Chartered Accountants (CAs): Essential for audit cases, foreign income, or litigation history.
• Tax software: Use CBDT-approved tools (e.g., ClearTax, Quicko) for error-free filing.

Final Note: Proactive compliance reduces delays by 80%. Taxpayers must stay updated on CBDT notifications (e.g., new ITR forms, revised due dates) and prioritize accuracy over speed. For persistent issues, escalate via grievance portals or legal remedies (Section 6).

Note: All timelines and rules are based on CBDT guidelines for AY 2025-26. Verify updates on the official e-filing portal before filing.

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified professional for specific guidance.

References:
– CBDT official: https://incometaxindia.gov.in/
– Income Tax Act: https://www.incometaxindia.gov.in/pages/acts/income-tax-act.aspx
– TaxGuru: https://taxguru.in/
– Haryana Labour Department: http://harpr.gov.in/

C.K. Gupta

Hello, I am C.K. Gupta owner of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.