Income tax refund occur when taxpayers pay more tax during the year than their actual liability, often due to excess TDS deductions or advance tax payments. The Income Tax Department processes these refunds after ITR filing and verification, crediting them directly to the pre-validated bank account. Timelines typically range from 7 days to 5 weeks, depending on accuracy and processing speed.
Income tax refunds occur when taxpayers pay more tax during the year than their actual liability, often due to excess TDS deductions or advance tax payments. The Income Tax Department processes these refunds after ITR filing and verification, crediting them directly to the pre-validated bank account. Timelines typically range from 7 days to 5 weeks, depending on accuracy and processing speed.
ITR filing and verification
Taxpayers must first file their Income Tax Return (ITR) accurately on the e-filing portal before the due date. E-verification via Aadhaar OTP, net banking, or ITR-V form is mandatory to initiate processing, as refunds only start post-verification. Delays arise if details like PAN or bank account mismatch records.
Standard refund timeline
Refunds are usually processed and credited within 4-5 weeks after successful e-verification for straightforward cases. Pre-validating the bank account and ensuring no discrepancies can shorten this to 7-20 working days or even 7 days for early filers. Complex returns or high-volume filing periods may extend it slightly.
Common Delay Reasons
Issues like incorrect bank details, unverified returns, data mismatches, or scrutiny notices often cause delays beyond the standard period. For AY 2025-26, some low-value refunds faced holds due to claim errors, with releases expected by December 2025. Taxpayers receive email intimations for rectifications.
Checking Refund Status
Track status on the Income Tax e-filing portal under ‘My Account’ > ‘Refund/Demand Status’, using PAN and assessment year. statuses include ‘Issued’, ‘Failed’, or ‘Adjusted’; failed refunds return via cheque if unclaimed after 120 days. Interest at 0.5% per month is payable on delays beyond prescribed timelines.
How interest on delayed tax refunds is calculated
Interest on delayed income tax refunds in India is governed by Section 244A of the Income Tax Act, providing simple interest at 0.5% per month (equivalent to 6% per annum) on the refund amount when the delay is attributable to the department.
Calculation method
The interest is simple, not compound, applied to the principal refund amount for every complete month or part thereof from the specified due date until the refund is granted. For example, on a Rs 20,000 refund delayed by three months, interest equals Rs 20,000 × 0.5% × 3 = ₹300.
Starting date for interest
Interest begins after the processing period: from 1st April of the relevant assessment year (or ITR filing date if filed late) for TDS refunds if filed on time, or post the date the refund becomes due (typically 3-6 months after claim). It runs until the refund order date, excluding taxpayer-caused delays like errors or non-response to notices.
Eligibility and exceptions
Taxpayers qualify only if the delay stems from departmental reasons, such as processing hold-ups; no interest applies for filer errors, mismatches, or late filings. The interest is automatically credited with the refund and is taxable as “income from other sources” in the year received.
Reasons a refund can be delayed and how to fix them
Income tax refunds can be delayed due to several common issues, but most are fixable through the e-filing portal. The Income Tax Department processes refunds within 4-5 weeks typically, yet errors or flags extend this.
Data mismatches
Discrepancies between ITR details, Form 26AS, AIS, or TIS- such as unreported TDS, advance tax, or income—trigger holds for review. Fix by checking these forms on the portal, filing a rectification under Section 154 if errors exist, and resubmitting corrected data promptly.
Bank account issues
Incorrect, inactive, or unvalidated bank accounts cause failed credits, shown as “Refund Failed” in status. Resolve by pre-validating a new account via the portal, raising a “Refund Re-issue” request with PAN and assessment year, or contacting CPC if needed.
Verification and scrutiny
Pending e-verification, scrutiny selection, or non-response to notices halts processing. Complete verification instantly using Aadhaar OTP or digital signature, respond to all CPC emails, and track via ‘Refund/Demand Status’ to address flags.
Outstanding demands
Refunds get adjusted against prior tax dues under Section 245. View demands in the portal, pay or rectify them through e-Pay Tax or grievance filing on e-Nivaran to release the balance.