Numerous Indian taxpayers who filed their income tax returns well before the September 16, 2025 deadline continue to wait for their refunds, with the Central Board of Direct Taxes attributing the delays to increased verification of questionable deduction claims.
CBDT Addresses Refund Delays at Trade Fair
While inaugurating a taxpayers' lounge at the India International Trade Fair, CBDT Chairman Ravi Agrawal confirmed that the department has reached out to individuals who might have omitted crucial disclosures, requesting them to submit revised returns. The tax authority has prioritized releasing lower-value refunds while scrutinizing questionable claims.
Agrawal stated, "Low-value refunds are being released. We have analysed and found that some wrong refunds or deductions were being claimed. So, this is a continuous process. We hope to release the remaining refunds by this month or by December."
Taxpayers Entitled to Interest on Delayed Refunds
Legal experts emphasize that taxpayers experiencing refund delays not caused by their own errors qualify for statutory interest under Section 244A of the Income Tax Act. Neeraj Agarwala, Partner at Nangia & Co LLP, clarified that the department pays simple interest at 0.5% per month (6% annually) on delayed refunds.
For returns submitted by September 16, 2025, interest calculation begins from April 1 until the refund issuance date. Belated filings trigger interest from the actual filing date.
Interest Calculation Rules for Different Refund Types
Refund category: TDS/TCS/advance tax/taxes paid under Section 199
Interest rate: 0.5% per month
Period: From April 1 of assessment year to refund date
Refund category: Self-assessment tax paid under Section 140A
Interest rate: 0.5% per month
Period: From later of return filing or tax payment date until refund
Refund category: Other cases
Interest rate: 0.5% per month
Period: From date of tax/penalty payment to refund date
Refund category: Excess TDS/TCS paid by deductor
Interest rate: 0.5% per month
Period: From date of refund claim or tax payment to refund date
When Interest Doesn't Apply
CA Mohit Gupta, Partner at PNAM & Co LLP, explained that interest accrues continuously at 6% annually until refund payment, regardless of scrutiny proceedings. However, taxpayers become ineligible if they provide incomplete information, delay responses to notices, or submit incorrect details. Refunds below ₹100 or those arising from excess self-assessment tax under Section 140A also don't qualify for interest.
Key Reasons Behind This Year's Extended Delays
Income Tax Department data from November 10, 2025 shows an 18% decline in refunds despite a 7% year-on-year increase in net direct tax collections. Multiple compliance issues contribute to slower processing:
1. Data Mismatch Issues: TDS/TCS credit discrepancies remain the primary delay trigger. Incorrect TAN details, wrong section codes, outdated challans, or inconsistencies between gross and net interest figures often require manual intervention. Even minor variations between filings and Form 26AS, Annual Information Statement, or the new Tax Information Statement can flag cases for additional verification.
2. Complex Financial Profiles: Larger refund claims involving foreign income, capital gains, or multiple income streams undergo extended review. Cases with foreign income frequently experience additional delays due to unreflected foreign tax credits. Inconsistencies between ITR disclosures and AIS/TIS data, particularly concerning interest, dividends, capital gains, mutual fund redemptions, property transactions, or high-value SFT-flagged items often trigger automated alerts.
3. Administrative Hurdles: Refunds face obstacles when bank accounts lack pre-validation, PAN remains unlinked to Aadhaar, or previous tax demands stay unresolved. Returns not e-verified within 30 days become invalid until verification completes. When PAN becomes inoperative under Rule 114AAA, it disrupts every processing stage—from TDS credit mapping to bank validation—making refunds impossible until PAN restoration.
CBDT's New Powers to Expedite Corrections
To accelerate error resolution, the CBDT issued Notification No. 155/2025, granting the CPC Commissioner concurrent authority to rectify apparent errors and issue revised demand orders directly. This upgrade enables CPC Bengaluru to resolve long-pending cases faster without awaiting higher-level officer approvals.
Steps Taxpayers Can Take for Stuck Refunds
If errors remain unresolved or earlier rectification requests haven't been processed, taxpayers can file fresh online rectification requests under Section 154. The Income Tax portal's e-Nivaran module allows users to submit detailed complaints, upload supporting documents, and monitor progress online.
When responses lag, escalation through CPGRAMS often prompts quicker action since grievances receive senior administrative review. Taxpayers may also contact their jurisdictional Assessing Officer or request personal hearings. For prolonged inaction or unjustified delays, filing writ petitions before High Courts remains an available legal remedy.
While refund delays prove frustrating, the law provides compensation when taxpayers aren't at fault. Understanding interest calculation methods, ensuring accurate disclosures, and effectively using grievance channels can help shorten waiting periods and ensure refunds—plus any due interest—reach taxpayers promptly.
