Income Tax Refund Delay: Why 24.64 Lakh ITRs Are Still Pending for AY 2025 26
ITR Chaos: 8.8 Cr returns filed, yet 24.64L refunds frozen for 90+ days! Why is YOUR money stuck in govt vaults? Hidden NUDGE traps, data mismatches & backlog secrets revealed. Salaried Indians fume—will refunds EVER arrive? Discover fixes before it’s too late!
Over 24.64 lakh income tax returns remain unprocessed for more than 90 days out of roughly 8.80 crore ITRs filed for Assessment Year (AY) 2025‑26 as of early February 2026. For millions of salaried professionals, pensioners, and small businessmen across the country, this translates into delayed refunds that can strain household budgets and affect planned savings or investments.
In this blog, we look at the situation from an Indian taxpayer’s perspective—what is actually causing the delay, how the government and tax department are responding, and what you as a filer can and should do to either protect your refund or find realistic clarity instead of endless anxiety.
What the Numbers Actually Mean
Parliament was informed that, as of about 4 February 2026, a total of 8,79,62,234 returns had been filed for AY 2025‑26, with 24,64,044 of those remaining pending for processing for over 90 days. In other words, while the vast majority of returns are being handled within three months, a concentrated backlog of roughly 2.8% of all filings is still stuck in the system.
Because income tax refunds are typically issued only after processing is complete, many of these 24.64 lakh pending cases involve genuine taxpayers who have paid more tax than due but are now waiting for their money. For self‑employed individuals and independent professionals, this delay can directly affect working‑capital cycles, essentially turning an expected refund into an unintended interest‑free loan to the government.
Why Processing Is Still Taking Longer
Several factors explain why the Income Tax Department is still grappling with a backlog despite an almost fully digital ITR ecosystem.
- Data‑matching and mismatch flags
The government now has TDS, bank interest, share trading, property‑registration, and even foreign‑asset data flowing into the e‑filing portal through AIS (Annual Information Statement) and TIS (Taxpayer Information Summary). When these numbers don’t tallly with your ITR—say, higher interest or capital gains than you declared—the return is pushed into “Mismatched/Scrutiny‑marked” queue, slowing processing. - NUDGE‑driven revision spike
The Compliance‑via‑“NUDGE” initiative sends targeted SMS/email alerts urging selected taxpayers to review and revise their returns for possible under‑reporting or excess deductions. In just two years, about 1.11 crore updated or revised ITRs have been filed, generating over ₹6,976 crore in additional tax receipts alone. This revision rush increases the volume of returns requiring manual or semi‑manual review, adding to the 90‑day backlog. - Complex return types
Not all 8.80 crore filings are simple ITR‑1 or ITR‑4 forms. Returns for freelancers with multiple income streams, entrepreneurs claiming 80‑C–type deductions, or NRIs with foreign‑asset disclosures require deeper checks, thus bumping them into slower‑lane queues. - System capacity vs filing surge
The department is simultaneously pushing higher digitization, pre‑filled data, and automated checks, but sheer volume—8.80 crore filings—is unprecedented compared with a decade ago. Any technical or staffing bottleneck spills directly into processing time for normal refund cases.
How “Excess” Compliance Is Pushing Up Delays
The government openly credits the NUDGE campaign with significant revenue gains. Beyond 1.11 crore revised ITRs, refund amounts have been adjusted on account of additional tax payments by about ₹1,834 crore in December 2025, illustrating that “refunds” are no longer straightforward paybacks but part of an active compliance loop.
For an ordinary taxpayer, this can feel Kafkaesque: you file quickly, think you have a simple refund coming, and suddenly find notices or “Defective Return” alerts related to 80G deductions, 80E education‑loan claims, or foreign‑income omissions you genuinely forgot to report. In such cases, the refund can be stopped, reduced, or sent to scrutiny while the department verifies your claims, directly feeding the 24.64‑lakh‑strong backlog.
Indian‑Specific Pain Points: From Salaries to Small Businesses
From an Indian perspective, the 90‑day‑plus refund delay creates very real household‑budget stress and not just technical annoyance.
- Salaried middle‑class families: Many rely on the annual refund to pre‑pay EMIs, fund children’s education fees, or cover emergency health‑cash needs. A 4–5‑month wait can derail those plans entirely, even if the refund itself is modest.
- Senior citizens and pensioners: A large chunk of pending refunds are estimated to belong to older taxpayers whose fixed‑income setup leaves little room for internal “credit buffers.” When your HRA is overstated on the portal or bank‑interest data seems off, your refund can vanish into a notice‑based enquiry instead of reaching your account.
- Freelancers and small vendors: For professionals paid via multiple bank accounts, UPI aggregators, or cash‑dominated trades, even genuine income shown may trigger a data‑matching red flag. That one protest notice can push a modest refund into pending status for months, affecting working‑capital planning.
Tax experts argue that the current system unavoidably favours “zero‑defect” filers—those who double‑check Form 26AS/AIS before filing—over “good‑faith” filers who file on time but leave loose ends.
Legal and Interest Angle: Are You Even Eligible for Compensation?
Under Section 244A of the Income‑Tax Act, interest is payable on certain types of delayed refunds, but the conditions are much tighter than many assume. Typically:
- You must have filed your return before the indexing cut‑off (often 31 January for salaried persons or the extended statutory deadline).
- The delay must result from the department (not from you ignoring a “defective” notice or not responding to an ITSA‑notice).
In practice, if your ITR is pending for 90 days because you failed to act on a system notice or incomplete PAN‑bank linkage, claiming a robust interest payout becomes very difficult. On the other hand, if the delay is purely due to internal processing and you complied with all notices, interest at about 0.5% per month can accrue, but asserting it usually involves filing a grievance or an application under rule‑281 typically via a chartered accountant or tax‑help platform.
For India’s typical filer, that extra 6%–8% interest is emotionally comforting, but the real headache remains the cash‑flow gap, not legal technicalities.
What You Should Do If Your Refund Feels “Too Slow”
From an E‑E‑A‑T‑worthy standpoint—experience, expertise, authoritativeness, and trust—here are clear, India‑context‑relevant actions to take once you spot that your AY 2025‑26 refund timeline feels off track.
Step 1: Verify Status on the Official Portal
Log in to the Income Tax e‑Filing portal and check:
- Whether your ITR has been verified and processed.
- In the “Refund/Demand Status” tab, note the current status: “Refund Paid,” “Refund Processing,” “Defective Return,” or “Asked for Rectification.”
If the status is stuck at “Processed – Refund processing for 90 days +,” this aligns with the national‑level 24‑lakh‑plus backlog and does not yet mean you are “left out by mistake.”
Step 2: Check for Notices and AIS/TIS Mismatches
Often, a delayed refund corresponds with:
- A system‑generated ODR (Online Dispute Resolution) or Defective Notice under Sections 139(9) or related provisions.
- Mismatches shown in AIS/TIS between your reported interest, TDS, or other income versus third‑party data.
If you see a notice:
- Acknowledge and respond within the given timeframe (generally 30 days for most such notices).
- Do not ignore the SMS/email and portal alert; delays in reply are the single biggest cause of refunds being artificially prolonged in the system.
Step 3: Ensure Perfect Bank and PAN Linkage
Disbursements are almost entirely NEFT‑based, and even small errors in bank details—wrong account number, IFSC error, or PAN‑bank mismatch—can push a valid refund into a “bounced/re‑process” queue.
Double‑check that:
- The bank account you quoted in the ITR matches your Aadhaar‑linked bank account where possible.
- The account is active, non‑dormant, and not flagged in any RBI internal list.
Several refunds from the 24.64‑lakh‑pending pool are expected to clear once taxpayers re‑submit correct banking details following simple verification emails from the department.
Step 4: Consider a Rectification (ITO Restriction)
If the system shows a defect or inadvertently rejected some of your legitimate deductions (say, Section 80‑G donation slips), you may need to file an intimation under Section 143(1) read with Section 139(9) (rectification request) rather than waiting indefinitely.
From an Indian‑practice angle:
- A rectification can help only if the defect is genuinely in your favour and not in the department’s favour.
- Often, this move is best guided by a practising chartered accountant or a reputable tax‑software helpdesk used to AIS‑driven disputes.
Step 5: Escalate Only When Technical Solutions Fail
If, after confirming status, notices, AIS, and bank details are all in order, yet your refund still looks non‑existent month after month, you can:
- Formalise a grievance on the income‑tax portal or through a CA‑assisted process.
- In some states, city‑level ITO‑Ombudsman or SB‑Assessment seniors can be approached via a written application after the statutory 90‑day window, supported by ITR and status‑screen evidence.
However, always keep in mind that mass‑level refunds chug slowly; escalation can help in corner‑case situations but rarely delivers overnight action when the entire Delhi‑Mumbai‑Kolkata‑Chennai ecosystem is handling over 8.5 crore ITR‑2025‑26 cases.
A Long‑Term Way Forward for Indian Taxpayers
For India’s future‑proof filer, this episode serves as a wake‑up call to shift from “submit‑and‑forget” to “submit‑with‑verification.”
- Pre‑filing, download Form 26AS and AIS/TIS once every quarter and compare income, TDS, and deductions before clicking “Submit.”
- For eligible individuals, leverage pre‑filled ITR suggestions on the Centralised Processing Centre (CPC) portal, but still cross‑check those pre‑filled fields instead of auto‑accepting them blindly.
- If you’re frequently in the 20–30 LPA bracket or have foreign‑income exposure, consider an annual consultation with an independent tax practitioner rather than relying only on software calculators.
If taxpayers become more meticulous up front, the 24‑lakh‑plus‑pending‑beyond‑90‑days backlog may start shrinking, and refunds will follow the original idea of the Income‑Tax Act: returning overpaid tax quickly, instead of treating refunds as part of a compliance sieve.
Final Snapshot for the Ordinary Indian Filer
In essence:
- Yes, about 2.8% of 8.80‑crore ITRs for AY 2025‑26 are pending beyond 90 days, affecting lakh‑plus refunds.
- The root causes are mainly data‑mismatch checks, NUDGE‑driven revisions, complex returns, and system‑volume pressure, not deliberate withholding for typical small‑income filers.
- From your side, the most effective moves are timely notice‑response, AIS verification before filing, and ensuring identical bank/PAN data across portals.
If your refund hasn’t arrived, treat it not as a bureaucratic conspiracy but as a system‑driven checkpoint you can patiently manage—rather than capitulating to stress. In India’s rapidly data‑linked tax system, the person who double‑checks before filing is the one least likely to land up in that 24.64‑lakh‑pending cluster next time.
With over 15 years of experience in Banking, investment banking, personal finance, or financial planning, Dkush has a knack for breaking down complex financial concepts into actionable, easy-to-understand advice. A MBA finance and a lifelong learner, Dkush is committed to helping readers achieve financial independence through smart budgeting, investing, and wealth-building strategies, Follow Dailyfinancial.in for practical tips and a roadmap to financial success!
