Tax refunds issued by the Income Tax Department of India have fallen sharply in the financial year 2024-25, recording a 38 % drop compared with the previous year, according to multiple industry sources and tax professionals. The slowdown in refund payouts has sparked widespread concern among individual and corporate taxpayers awaiting excess tax recoveries. Business Today
Steep Decline in Refunds Compared to FY24
Official and industry data indicate that refunds paid out for the financial year FY25 are significantly lower than those issued in FY24. In many cases, total refund amounts processed so far are nearly 38 % below last year’s figures, particularly for higher refund claims above ₹30,000, where processing has been markedly slow.
This decline is largely attributed to extended processing times by the Central Board of Direct Taxes (CBDT) and stricter verification protocols, which have delayed the pace of refund payouts across multiple taxpayer categories.
Why Tax Refunds Are Taking Longer in FY25
Tax experts and filing professionals point to several reasons behind the slowdown:
1. Stricter Scrutiny and Verification
The Income Tax Department has increased the scrutiny on refund claims — especially larger ones — to verify the authenticity of deduction claims and other tax entries. Returns flagged for questionable deductions undergo additional checks before refunds are processed.
2. Delayed Release and Processing Bottlenecks
Late release of ITR forms and bottlenecks at centralised processing centres have compressed filing and verification timelines, slowing the overall pace of refund settlements for FY25.
3. Mismatched Records and Data Issues
Discrepancies between taxpayers’ bank account data, Form 26AS TDS records, and Automated Information System (AIS) entries have also contributed to delays, as returns with mismatched data require manual intervention.
Impact on Taxpayers
The sharp reduction in refunds has affected many salaried individuals, self-employed professionals, and businesses who rely on timely refunds to manage cash flow and personal finances. Higher refund claims, in particular, continue to remain unresolved due to extended verification procedures.
Despite the delays, the tax department has indicated that legitimate refunds — especially smaller ones — are being processed, and many of the backlog cases are expected to be cleared as the review process concludes. CBDT officials have also reassured taxpayers that pending refunds will be addressed with due diligence.
What Taxpayers Can Do
Tax experts recommend that taxpayers:
🔹 Verify Bank Account Details and PAN Information: Ensuring correct bank details and PAN-Aadhaar linking can help reduce processing errors and delays. Moneycontrol
🔹 Check Form 26AS and TDS Records: Mismatches between tax credit statements and ITR filings are a common trigger for hold-backs, so reconciling these can speed up refunds.
🔹 Monitor Refund Status Online: Taxpayers can check the status of their refund through the e-filing portal to stay informed on processing stages and required actions.
Looking Ahead
While tax refunds for FY25 have lagged considerably, the government’s increased focus on verification seeks to ensure accuracy and prevent fraudulent claims. Officials expect the refund distribution pace to pick up as manual reviews are completed and verification backlogs are addressed later in the fiscal timeline.
For many taxpayers, however, the wait continues — underscoring the challenge of balancing efficient taxpayer service with strict compliance and fraud prevention in the evolving tax administration landscape.
