Why Your ITR Refund is Delayed: Processing Backlog Hits 1 Crore Returns as CBDT Flags High-Value Claims

Millions of taxpayers who chose to file ITR well ahead of the July 31 deadline are confronting an unexpected reality: their income tax refunds remain stuck in processing limbo. 

The Central Board of Direct Taxes (CBDT) has acknowledged widespread delays, revealing that over one crore returns are pending verification. CBDT Chairman Ravi Agrawal attributed the bottleneck to enhanced scrutiny of high-value refund claims. 

Personal income tax refunds issued through early November totalled just ₹88,548 crore, compared to ₹1.42 lakh crore during the same period last year, a 38 percent plunge that underscores the crisis facing compliant taxpayers nationwide.

ITR Processing Infrastructure Overwhelmed?

The 2024-25 assessment year introduced sweeping reporting changes that fundamentally altered how taxpayers must file ITR returns. 

House rent allowance now requires a detailed landlord PAN and addresses. Home loan interest deductions require the bank name and property details. Capital gains reporting is split into different protocols for pre- and post-July 23, 2024 transactions. 

These expanded disclosure norms equipped the Income Tax Department with vastly more data points to cross-verify, inevitably slowing processing. Returns are now matched against third-party databases, insurance companies, banks, and fund houses before approval. 

Until verification responses arrive, returns remain frozen in processing queues, creating unprecedented ITR delay for even straightforward salary returns.

Taxpayers currently have only two ways to check their ITR refund status. Both methods show the basic status, but they do not tell you where your file is in the processing queue. Because of this, chartered accountants say taxpayers keep calling repeatedly, hoping for updates that simply don’t exist.

Refunds above ₹50,000 move even slower. 

These cases go through extra manual checks as the department uses stronger fraud-detection tools to flag inflated claims or suspicious deductions. As a result, larger refunds often get stuck for longer with no fixed timeline.

Why Are Refunds Stuck?

Taxpayer errors contribute significantly to refund holds, in addition to systemic delays. Mismatches between the data reported on the ITR and Form 26AS automatically trigger flags in the system. Bank account validation failures, such as incorrect numbers, unverified accounts, and inactive accounts, result in immediate rejections. 

Moreover, inactive or unlinked PAN-Aadhaar combinations lead to system blocks. If e-verification is performed late, tax returns are pushed to the back of the processing queue, regardless of when they were initially filed. 

The tax department has increased scrutiny on deductions under the old tax regime, requiring policy numbers and detailed bank information to combat fraud. As a result, legitimate claimants face thorough verification, with every declaration undergoing cross-checks against external databases.

When Can We Expect Resolutions?

For genuine cases of Income Tax Return (ITR) delays, Section 244A stipulates an annual interest rate of 6% if refunds are delayed beyond reasonable timeframes. This interest begins to accrue from April 1, 2024, for those who file on time. Taxpayers can submit formal complaints through the refund reissue mechanism available on the e-filing portal. 

However, tax practitioners advise that this should only be done after receiving clear communication confirming that a refund has failed. The Central Board of Direct Taxes (CBDT) has stated that legitimate refunds will be processed by December. 

Tax professionals recommend that individuals with simple returns, a single salary income, verified bank details, and prompt e-verification can expect their issues to be resolved in a matter of weeks. 

Conversely, those with multiple income sources, foreign income, or large refund claims may experience significantly longer wait times.

Are Security Measures in The Way of Efficiency?

The 2024-25 refund crisis exposes tensions between the Income Tax Department's fraud-combat mission and its obligation to process compliant returns efficiently. While enhanced verification serves valid purposes, the current implementation has overwhelmed the processing infrastructure. 

Taxpayers can minimize risks by ensuring accuracy between filings and Form 26AS, pre-validating bank accounts, completing e-verification immediately, and maintaining meticulous documentation. 

As India's tax base expands, the question becomes whether the centralized processing model can scale effectively, or whether structural reforms, distributed centres, AI-powered verification, and real-time transparency become necessary to prevent annual refund crises from becoming the norm.

(yMedia is the content partner for this story)