Income Tax Refund Delay 2025: Reasons And What To Do If Your Refund Is Delayed?

When the taxes paid by you (TDS, advance tax and self assessment tax) is more than your actual tax liability, you are eligible for income tax refund.

Key Highlights

Here are the top reasons for delay in ITR refunds FY 2024-25:

• Stricter scrutiny process and more compliance requirements.
• ITR filed close to due date.
• Incorrect bank account details entered.
• Mismatch of information between ITR filed and Form 26AS.
• ITR shortlisted for scrutiny process.

What is an Income Tax Refund?

When you have paid more taxes than you were required to pay by way of TDS, TCS or advance tax, you get the additional amount paid as a tax refund. It's like receiving a refund for overpaying.

TDS +TCS + Advance Tax > Final Tax Amount = Tax Refund

TDS +TCS + Advance Tax < Final Tax Amount = Balance Tax Payable

For instance, if a taxpayer has paid Rs. 10,000 in taxes for the financial year 2024-2025, yet their actual tax liability is only Rs. 8,000, they are eligible for a refund of Rs. 2,000 from the Income Tax Department. Once the income tax return is filed and it has been verified, the income tax department will initiate the processing of the tax return. 

Refund Processing Time

After the tax return is processed, it will take around 4-5 weeks for the refund to get credited to the bank account of the taxpayer.

Reasons for ITR Refund Delay - FY 2024-25 

The following are the main reasons for delay for ITR filing FY 2024-25:

Major Changes Introduced in ITR Forms

For FY 2024-25, several major changes have been introduced regarding reporting requirements for income and financial transactions. These changes include:

• HRA claim: More details are required, such as the landlord's PAN, place of work, nature of work, etc.
• Interest claim on home loan: To claim this, you must provide the bank name, closing and opening amount of the loan, home address, etc.
• Capital Gain Reporting: There are different reporting requirements for the sale of capital assets before and 23 July after 23 July 2024.
• Deduction Claims: More details are required to claim deductions for life insurance, health insurance, mutual fund investments, etc.

This change significantly impacts reporting requirements on ITR, and the processing of ITRs will be more stringent this time.  As a result, it is expected that there may be delays in processing ITRs, which could consequently lead to delays in taxpayers' income tax refunds.

Increased Complexity And Strict Scrutiny

• This year, several amendments and changes have been made in income tax return forms and rules, and the Income Tax Department intensified its scrutiny process. 
• The Department analyses current-year ITRs and revisits old past returns to curb incorrect or fraudulent refund claims. 
• This rigorous examination of reported income and deductions means that returns flagged for suspicious activity will experience longer processing time for tax refunds.

The Department recently conducted visits to locations associated with individuals accused of helping taxpayers to claim fraudulent deductions. A key area of concern is political party donations under Section 80GGC, as this deduction has no ceiling limit.

General Issues

These are general issues and reasons for a delay in the income tax refund:

Incorrect TDS credit in 26AS: Any mismatch between the financial information in AIS (Annual Information Statement) or Form-16 and ITR may lead to a defective return or demand notice, significantly delaying income tax refund and processing time.

Bank Account Pre-Validation Issues: Even if ITR is successfully processed, the refund may be delayed or stalled if the assessee's bank account is not pre-validated on the Income Tax Portal. Pre-validation of bank account failure can occur due to incorrect IFSC code, incorrect account number, closed account, or a mismatch of name or date of birth in PAN records and the bank passbook.

Outstanding Demand From Previous Year: If taxpayers have an outstanding demand from the previous year, then the current year's IT refund will be adjusted against it. This may result in a reduced or withheld refund until the taxpayer clears or contests the dues.

What to do when my Refund is Delayed?

There can be many reasons for your refund not reaching you. Here is a table of reasons and the action plans you need to follow in each of those cases.

What to do if you have Not Received the Refund yet?

When the refund claim made in the ITR has failed to fetch the refund, we can request for refund reissue.

Please reach out to the IT department to have your refund-reissue. When getting in touch with the IT department, ensure you provide them with your PAN, the assessment year for which the refund was issued, and the exact refund amount. You have the option to contact the IT department through phone, mail, or their e-filing portal.

Here's how you can raise a refund re-issue request:

Step 1: Visit the e-filing portal and log in to your account.

Step 2: Navigate to "My Account" section.

Step 3: Select “Refund Re-issue” then click on and "create Refund Reissue Request”.

Step 4: Fill in the necessary details, including your PAN, assessment year, and refund amount.

Step 5: E-Verify.

Step 6: Submit the refund re-issue request.

How to Check your Refund Status on Income Tax Portal? 

If you have not received the refund yet, check the refund status by logging in to income tax e-filing portal. Follow the below steps to view the refund status:-

Step 1: Visit the income tax e-filing portal and log in to your account using the log in credentials.
Step 2: Click on ‘e-File’>‘Income Tax Returns’>’View Filed Returns’.

Step 3: Go to the relevant assessment year for which you want to check the refund and check the ITR status. In the given screenshot below, you can check the refund status of the assessment year 2024-25. To view the details, you can click on ‘View details’.

Step 4: The status of your refund will be displayed in a new window along with the information.

If your ITR is processed but refund is not issued, it will show status ‘Processed with refund due’. It normally takes 20 to 45 days after the ITR processing to receive the refund amount.

Related articles:

Process to claim income tax refund

How to claim TDS refund