Understanding the Delays in Income Tax Refunds for FY 2024-25: Key Insights
Income tax refunds in India are experiencing significant delays this assessment year, raising concerns among taxpayers and tax professionals alike. Data from the Central Board of Direct Taxes (CBDT) reveals that personal income tax refunds have plummeted to ₹88,548 crore by early November, a stark decrease from ₹1.42 lakh crore during the same period last year. The total refund outgo has also dropped by approximately 18% year-on-year, prompting experts to investigate the reasons behind these processing delays.
Factors Contributing to Delays
Tax experts attribute the slowdown in refund processing to several factors, including the late release of income tax return (ITR) forms, increased verification checks, and operational constraints at the Centralized Processing Centre (CPC). According to CA Ashish Niraj, a partner at A S N & Company, nearly 80% of refunds exceeding ₹30,000 for their clients are delayed, while smaller refunds are typically processed within a month. This contrasts sharply with last year, when most refunds were cleared within one to two months. Karanjot Singh Khurana, a partner at Lakshmikumaran & Sridharan Attorneys, noted that refunds for non-corporate taxpayers have seen a decline of 37.72%, reflecting a broader trend of slower issuance.
Former Principal Commissioner of Income Tax OP Yadav highlighted that high-value refunds, particularly those related to salary cases, are also facing delays. This is often due to discrepancies arising from taxpayers claiming deductions and exemptions without timely submission of necessary documentation to their employers. The CBDT Chairman, Ravi Agrawal, acknowledged these issues, stating that the department is working to resolve the backlog and hopes to release the remaining refunds by December.
Impact of Late Form Releases
One of the primary reasons for the current delays is the late release of ITR forms. Khurana pointed out that the ITR forms for the assessment year 2025-26 were made available significantly later than in previous years. For instance, the utility for ITR 1 to 4 was released on June 11, 2025, compared to April 1, 2024, in the previous year. This delay has pushed back both return filing and refund processing timelines. Forms requiring more scrutiny, such as ITR 3 and ITR 6, have experienced the longest delays, further complicating the situation for taxpayers.
The slow processing at the CPC has been compounded by the increased scrutiny of high-value refunds, which has led to a backlog. Tax professionals have noted that refunds linked to complex cases, such as those involving capital gains or significant deductions, are particularly affected. This has resulted in a growing number of taxpayers facing uncertainty regarding their refunds.
Challenges with Verification and Compliance
The verification process for refunds has become more stringent this year, particularly for cases involving high-value claims. Yadav explained that refunds are often flagged for additional verification when they appear disproportionate to the taxes paid. This includes cases where taxpayers have not submitted necessary documentation, such as Form 12BB, to their employers in a timely manner. As a result, many refunds are subjected to risk-based checks, leading to further delays.
Experts have also raised concerns about discrepancies in the Annual Information Statement (AIS), where the same income may be reported from multiple sources, complicating the reconciliation process. This has led to additional scrutiny and delays in processing refunds. While some professionals believe that these mismatches are not a major cause of delays, they acknowledge that they contribute to the overall complexity of the refund process.
Recommendations for Taxpayers
In light of the ongoing delays, tax professionals are advising taxpayers to take proactive steps to ensure smoother processing of their returns and refunds. Amarpal S. Chadha, a partner at EY India, recommends that taxpayers select the correct ITR form based on their income sources and meticulously reconcile details in the AIS, TIS, and Form 26AS to eliminate discrepancies. Additionally, disclosing all active bank accounts and validating deductions with proper documentation can help expedite the process. Khurana emphasizes the importance of ensuring that income, deductions, and refund claims align with statutory provisions and supporting documents. By taking these precautions, taxpayers can significantly reduce the likelihood of delays in receiving their refunds. As the tax season progresses, experts hope that improvements in processing efficiency will alleviate some of the current frustrations faced by taxpayers.
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