Income Tax Refund Delays: Taxpayers May Have To Wait For Another Year — Here's Why
The Income Tax Department can process the income tax returns for FY 2024-25 till Dec. 31, 2026.
Many taxpayers are still waiting for their income tax refunds for the Assessment Year (AY) 2025–26. According to the latest figures available on the Income Tax (I-T) Department’s portal, about 61 lakh returns had not been processed by Jan. 6, 2026, delaying refunds for lakhs of people.
Delays of this nature often leave taxpayers on edge after the Dec. 31, 2025, deadline for belated returns. However, going beyond the Dec. 31 deadline does not breach any legal provisions.
As per Section 143(1), tax returns for the financial year 2024–25 can be processed by the IT Department up to Dec. 31, 2026. This effectively grants the authorities a one-year window to finish processing, regardless of whether belated and revised return deadlines have expired.
Missing the Dec. 31 timeline is not uncommon for tax refunds, as the I-T department faces no penal action within the one-year window. The only financial implication is the requirement to compensate taxpayers with interest at 0.5% per month under Section 244A of the Income-tax Act, 1961.
The interest paid on delayed tax refunds varies based on the timing and method of the tax payment. In most situations, the calculation runs from either the date the tax was paid or the date the return was filed, whichever comes later, until the refund is finally credited.
An important condition applies to this rule. Refunds amounting to under 10% of the overall tax paid for the year do not attract any interest.
Currently, tax returns that do not fully align with the data held by the department, such as details reflected in Form 26AS, the Annual Information Statement (AIS) and the Taxpayer Information Summary (TIS), are facing longer processing times. Stricter verification measures this year have slowed down assessments as well as the release of refunds.
Processing tends to be swifter for salaried taxpayers, but the pace slows when returns involve high-value refund claims or deductions not supported by Form 16. Senior citizens, other than those aged 75 and above who earn only a pension and interest income and are exempt from filing, are facing similar delays in cases marked by discrepancies. By comparison, returns that do not result in either a refund or a tax demand are largely unaffected.
For a significant section of taxpayers, delayed refunds may be less about irregularities and more about the legally permitted window, which runs until Dec. 31, 2026, for AY 2025–26.
