Income Tax Refund Delays Hit Taxpayers Hard: FY25 Refund Payouts Drop 38% Amid Slow Processing

Taxpayers across India are facing significant delays in receiving income tax refunds this year, with FY 2024–25 recording a sharp decline in payouts. Official data shows that refunds issued up to early November fell to ₹88,548 crore, compared with ₹1.42 lakh crore during the same period last year — a steep 38% year-on-year drop.

Why the Refund Delays Are Increasing

Tax experts say the slowdown is the result of multiple factors:

1. Late Release of ITR Forms

Several income-tax return forms that were available as early as April last year were released months late in 2024.
This compressed the filing window and pushed millions of returns closer to deadlines, creating processing backlogs.

2. Enhanced Scrutiny for Large Refunds

Higher-value refunds — especially those above ₹30,000 — are moving slowly due to stricter verification rules.
Most delays are being reported in non-corporate taxpayer refunds, which form a big chunk of the decline.

3. Processing Bottlenecks at CPC Bengaluru

Tax professionals say the Centralised Processing Centre (CPC) is handling massive volumes but facing delays with:

• returns involving loss carry-forward,
• large TDS mismatch cases,
• returns flagged under risk-based scrutiny, and
• corrections due to employer-side TDS errors.

Common Issues Causing Delays

Many refunds are being held due to avoidable taxpayer mistakes such as:

• incorrect or inactive bank account details,
• wrong ITR form selected,
• mismatches between 26AS, AIS, and ITR,
• non-verification of returns,
• claiming deductions flagged as ineligible.

Any mismatch triggers manual verification, delaying refunds further.

Taxpayers Frustrated Over Lack of Transparency

Users say the income-tax portal offers limited insight into processing stages.
Most grievance submissions receive generic, copy-paste replies, making it impossible to estimate timelines.

Tax professionals have urged the government to implement a real-time refund tracking system to reduce uncertainty.

Record Filings Adding to Pressure

More than 8 crore returns were filed by November-end, and a significant surge is expected due to the audit-return deadline now extended to December 10.
The compressed compliance calendar has intensified the processing load.