Recent Slowdown in ITR Processing: Tax Refunds on Hold

The Central Board of Direct Taxes (CBDT) has acknowledged that many taxpayers who filed for refunds post-the deadline for FY 2024-25 are still waiting. Refund issuance has dropped significantly  for example refunds issued between April 1 and November 10 were down about 18% year-on-year (to ~₹2.42 lakh crore). 

Key Takeaways

• ITR refunds are slower this year due to stricter verification, system upgrades, and increased fraud-detection checks.
• High-value refunds and returns with multiple income sources, foreign income, or large deductions are undergoing manual review, causing delays.
• AIS / Form 26AS mismatches (interest income, TDS, capital gains) are one of the most common reasons refunds are on hold.
• Bank account pre-validation, PAN–Aadhaar linkage, and timely e-verification are essential to ensure smooth refund processing.
• If the delay is not the taxpayer’s fault, the Income Tax Department must pay interest under Section 244A (6% per annum).

Why the slowdown?

Several interlinked factors are contributing:

• High-value or “red-flagged” claims: Returns showing unusually large refunds, multiple incomes, foreign income, capital gains or flagged deductions are being placed under deeper review. CBDT chair noted that low-value refunds are being released, but high-value ones are pending
• Data mismatches / compliance checks: When claimed TDS, interest income, AIS (“Annual Information Statement”) or Form 26AS entries don’t match the ITR, the system flags them for manual review. Bank account validation, PAN–Aadhaar linkage checks and earlier demands unresolved are also causing delays.
• System/utility changes & filing delays: The ITR-filing utilities and forms changed this year, which compressed timelines and may have led to more errors or late filings. 
• Back-log of pending returns: Over 1 crore ITRs still pending processing, while many returns hadn’t even moved to the verification stage.

What it means for taxpayers?

• If you filed a relatively simple return (salary, one house property, straightforward deduction) that was e-verified promptly, you may still get a refund in a few weeks.
• But if your return involves: large refund claims, foreign income or multiple sources of income, underwent late verification, or your bank account / PAN / Aadhaar linkage is not up-to-date — you may face weeks to months of delay.
• Fortunately: If the delay is not your fault and the tax department holds up your refund, you may be eligible for interest under Section 244A of the Income‑tax Act, 1961 (usually 6 % per annum or 0.5 % per month) from the date the refund became due

AIS / Form 26AS Mismatches

Even small mismatches — like a difference in interest income, TDS, or capital gains — can slow down processing.

The system automatically flags any variation between:

• ITR
• AIS (Annual Information Statement)
• Form 26AS

These mismatches are one of the top reasons for refunds being kept on hold.

Compliance Checks & New Fraud Filters

This year, the department has implemented stronger fraud-detection algorithms to tackle fake deductions, inflated exemptions, or bogus loss claims.

While this step protects genuine taxpayers, it also slows down overall processing speed.

Late Verification by Taxpayers

Many taxpayers filed their returns on time but verified them late, which pushes the ITR to the back of the queue.

Bank Account / PAN–Aadhaar Issues

Refunds get stuck if:

• The bank account is not pre-validated
• PAN–Aadhaar is not linked
• The name/IFSC doesn’t match exactly

Even minor discrepancies can pause the refund.

What Can be Done?

Check Your Refund Status

Log in to the income-tax portal → Services → Refund Status.

Verify AIS & 26AS Data

Ensure interest income, stock market gains, TDS, salary, rent etc. match your ITR.

Confirm Bank Account Pre-Validation

This is one of the most common causes of refund failure.

Respond to Notices Quickly

If the department has raised a query or wants clarification, your refund will not move until you reply.

Will You Get Interest for the Delay?

Yes — if the delay is not your fault.

Under Section 244A, the government must pay 6% interest per year on delayed refunds.

This is automatically added when the refund is finally released.

FAQs

How do I know if something is wrong with my ITR?

Check your dashboard on the Income Tax Portal:

• Any pending notices
• Any mismatches in AIS / Form 26AS
• Bank account validation status

If these are clear, there is usually no issue.

What if my refund is stuck for months?

You can:

• Raise a query via e-Nivaran
• Contact your Assessing Officer
• Re-check AIS/26AS mismatches

Should I refile or revise my ITR if the refund is delayed?

No. Do not revise unless you find an actual mistake. Unnecessary revisions will delay processing even more.