Many taxpayers awaiting income tax refunds for Assessment Year (AY) 2025-26 are finding themselves in prolonged uncertainty. If your refund has not yet been credited, you are not alone. As per data available on the Income Tax Department’s portal, nearly 61 lakh income tax returns remain unprocessed as of 6 January 2026, resulting in significant refund delays.
Although this situation may appear unusual—especially after the belated return deadline—it is important to understand that such delays are legally permissible under the Income-tax Act, 1961.
Under Section 143(1) of the Income-tax Act, the Centralised Processing Centre (CPC) has time up to 31 December 2026 to process returns filed for FY 2024-25 (AY 2025-26).
This effectively provides the tax department with a one-year window beyond the assessment year to complete return processing, irrespective of whether refunds are involved. Consequently, refunds pending even after December 31, 2025 do not constitute a violation of law.
The only financial implication for the department in case of delay is the obligation to pay interest under Section 244A, at the prescribed rate.
Taxpayers are entitled to interest on delayed refunds, subject to certain conditions:
Interest is paid at 0.5% per month (simple interest) under Section 244A.
If the return is filed within the due date, interest is calculated from 1 April of the assessment year until the refund is issued.
For belated returns, interest is computed from the date of filing the return to the date of refund.
No interest is payable if the refund amount is less than 10% of the total tax paid.
Interest will not be allowed if the delay is attributable to the taxpayer, such as non-verification of return or incorrect bank details.
Illustration:
If excess self-assessment tax was paid on 31 July 2025 and the refund is received on 15 December 2025, interest would be payable for approximately five months at 0.5% per month.
Although more than 7.8 crore returns have already been processed, the backlog in AY 2025-26 is noticeably higher than in earlier years. Several factors are contributing to the slowdown:
Returns showing inconsistencies with Form 26AS, AIS, or TIS are undergoing enhanced scrutiny. This year has witnessed stricter cross-verification, leading to longer processing timelines.
Cases involving large refund claims, substantial deductions, or multiple income streams are subject to deeper risk analysis, which naturally extends processing time.
The ITR utilities were notified later than usual, and the return filing deadline was extended from 31 July 2025 to 15 September 2025. This compressed the department’s processing window and resulted in accumulation of pending cases.
The new ITR forms introduced expanded disclosures, including:
Detailed capital gains break-ups
Mandatory landlord PAN for HRA claims
Enhanced home loan reporting
Simultaneously, backend upgrades to the e-filing portal caused intermittent technical issues, slowing down return processing.
During November and December 2025, the department launched NUDGE (Non-intrusive Usage of Data to Guide and Enable) campaigns focusing on:
Foreign asset disclosures
Suspected bogus donation claims
These additional checks further increased processing time.
Refunds are also held up due to:
Non e-verification of returns
Invalid or unvalidated bank accounts
Failure to respond to proposed adjustments or notices
Refund delays are not uniform across all categories of taxpayers:
Salaried individuals with simple returns generally experience faster processing.
Taxpayers claiming high refunds or deductions exceeding Form 16 figures face longer delays.
Senior citizens with mismatched data (other than those exempt under Section 194P) are also affected.
Returns with “refund claims” are processed more cautiously compared to “nil demand, nil refund” cases.
To avoid avoidable delays, taxpayers should ensure the following:
ITR has been successfully e-verified
Bank account is validated and linked with PAN
No mismatches exist between ITR, Form 26AS, AIS, and TIS
Any pending communication, notice, or proposed adjustment has been addressed promptly
While waiting several months for a tax refund can be frustrating, the law permits the Income Tax Department to process returns for AY 2025-26 up to 31 December 2026. In most cases, delays are procedural rather than punitive.
Eligible taxpayers will receive interest for the waiting period, and for many, the refund is simply a matter of time. Ensuring accuracy, timely verification, and responsiveness remains the best way to minimise further delays.
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