Even after the December 31 deadline for filing belated income tax returns, a large number of taxpayers are still waiting for their returns to be processed, and many are anxiously tracking their refunds.
As per data available on the Income Tax Department website, around 8.80 crore income tax returns (ITRs) have been filed so far for Assessment Year (AY) 2025–26. Of these, nearly 8.66 crore returns have been verified, and about 8.02 crore returns have already been processed. That leaves roughly 63 lakh taxpayers whose returns are still under processing — and for many of them, refunds are yet to be issued.
So why are so many returns still pending, and should taxpayers be worried? Tax experts say the delays are largely intentional and compliance-driven, not a sign of system failure.
Delays are not unusual — the law allows time
Tax experts are of the view that the mere fact that returns are pending after December 31 does not mean something has gone wrong. Under the Income-tax Act, the Centralised Processing Centre (CPC) has up to nine months from the end of the financial year to process returns filed for that year.
For returns filed in AY 2025–26 (related to FY 2024–25), this effectively means the department has time until December 31, 2026.
Given that over 90% of verified returns have already been processed, the current pendency is well within legal timelines and not automatically a cause for alarm.
Why refunds are being held back this year
According to an tax expert, the unusually large number of pending returns is mainly due to stricter data checks and risk-based processing, rather than manpower shortages or portal breakdowns.
“The unusually large number of unprocessed returns is largely a by-product of the Income-tax Department’s expanded use of data analytics and pre-emptive compliance checks,” he explains.
The department today has access to vast third-party data — including TDS filings, Annual Information Statements (AIS), Form 26AS, bank data, mutual fund transactions and SFT reports. If the figures reported in a taxpayer’s return do not fully match this data, the return is automatically flagged.
This means even small inconsistencies in income, deductions or exemptions can slow down processing.
‘Nudge’ campaign is a key reason for delay
One major reason many refunds are stuck is the CBDT’s “nudge” campaign, launched in December 2025.
Under this initiative, taxpayers whose returns show mismatches are being proactively informed via SMS or email and are given an opportunity to accept the difference or file a revised or updated return.
“Until such corrective action is taken, the Department has consciously kept processing of these returns in abeyance,” he says.
In simple terms, the tax department is pausing refunds on purpose, giving taxpayers a chance to correct errors before money is paid out or tax demands are raised.
Backend changes and late ITR forms also played a role
Another tax expert also points out that operational factors contributed to slower processing this year.
For AY 2025–26, several ITR forms and utilities were released later than usual, stretching from June to August. This delayed both filing and processing cycles.
Multiple factors have slowed return processing in AY 2025–26, he says.
Heightened scrutiny and data checks:
“The Income-tax Department has intensified risk-based reviews, with returns involving large or unusual refund claims being flagged for manual verification. Automated risk filters and mismatches with AIS/Form 26AS are leading to processing delays and revision prompts,” he added.
“Further, the CBDT has launched the 2nd NUDGE initiative based on AEOI data for FY 2024–25, identifying cases where foreign assets appear undisclosed in ITRs for AY 2025–26. Affected taxpayers are being alerted via SMS and email from 28 November 2025 to review and revise their returns by 31 December 2025 to avoid penal consequences.”
Late ITR forms and portal glitches:
“New return forms and utility updates were released weeks later than in prior years, pushing back filing and processing schedules. For AY 2025–26 many ITR forms only became available by June–August 2025. The portal’s backend also had limited glitches and heavy traffic near deadlines caused login/time-out in certain cases,” he explains.
“Even otherwise straightforward salaried returns may face delays if the underlying data does not fully align,” he notes.
In short, the delay is risk-based, not category-based.
Will taxpayers get interest on delayed refunds?
Yes — but with conditions.
Both experts confirm that Section 244A of the Income-tax Act provides for interest on delayed refunds. However, interest is not automatic in every case.
Key points taxpayers should know:
- Interest is paid at 0.5% per month (simple interest)
- The refund must exceed ₹100 or 10% of total tax paid, whichever is higher
- If the return is filed on time, interest usually runs from April 1 of the assessment year till the refund date
- For belated returns, interest is calculated only from the date of filing
For example, if a Rs 40,000 refund is delayed by eight months, the interest payable would be Rs 1,600. Even part of a month is counted as a full month for interest calculation.
What taxpayers should do now
If your refund is stuck, experts advise:
Regularly check your AIS and Form 26AS for mismatches
Respond promptly to any SMS or email alerts from the department
File a revised or updated return if discrepancies exist
Avoid panic — most delays are compliance-related, not rejection-related
For many taxpayers, refunds are delayed not because of wrongdoing, but because the tax department wants cleaner data and voluntary correction before money is released. In most cases, refunds will come — just not as fast as taxpayers would like.
