Income Tax Refund Delays: Taxpayers May Wait Until December 2026 for Processing
About 61 lakh income tax returns for AY 2025-26 remain unprocessed as of January 6, 2026, with the Income Tax Department having until December 31, 2026 to complete processing under Section 143(1). Delayed refunds attract 0.5% monthly interest under Section 244A, except for amounts under 10% of total tax paid. Enhanced verification measures and data mismatches are causing extended processing times, particularly affecting high-value claims and cases with unsupported deductions.
*this image is generated using AI for illustrative purposes only.
Millions of taxpayers across India continue to await their income tax refunds for Assessment Year 2025-26, with processing delays potentially extending well into 2026. The Income Tax Department's own portal data reveals the scale of pending cases and the legal framework governing refund timelines.
Current Processing Status
As of January 6, 2026, approximately 61 lakh income tax returns remained unprocessed according to figures available on the Income Tax Department's portal. This substantial backlog has left millions of taxpayers waiting for their refunds despite the December 31, 2025 deadline for belated returns having passed.
The department faces no immediate legal consequences for these delays, as Section 143(1) of the Income Tax Act provides a comprehensive processing window that extends well beyond traditional filing deadlines.
Legal Framework for Processing Delays
| Provision | Details |
|---|---|
| Processing Deadline | December 31, 2026 |
| Applicable Section | Section 143(1) |
| Financial Year Covered | 2024-25 |
| Interest Rate on Delays | 0.5% per month |
| Interest Exemption | Refunds under 10% of total tax paid |
Under Section 143(1), tax returns for financial year 2024-25 can be processed by the Income Tax Department up to December 31, 2026. This provision effectively grants authorities a one-year window to complete processing, regardless of whether belated and revised return deadlines have expired.
Interest Compensation Mechanism
Taxpayers affected by processing delays are entitled to interest compensation under Section 244A of the Income-tax Act, 1961. The department must pay interest at 0.5% per month on delayed refunds, calculated from either the date tax was paid or the return filing date, whichever comes later, until the refund is credited.
However, an important exemption applies to this interest provision. Refunds amounting to less than 10% of the overall tax paid for the year do not attract any interest compensation.
Factors Contributing to Delays
Processing delays are primarily attributed to enhanced verification measures implemented this year. Returns that do not fully align with departmental data face extended processing times, particularly those with discrepancies in:
- Form 26AS details
- Annual Information Statement (AIS) data
- Taxpayer Information Summary (TIS) information
Processing Speed Variations:
- Fastest Processing: Salaried taxpayers with straightforward returns
- Slower Processing: High-value refund claims and deductions not supported by Form 16
- Extended Delays: Senior citizens (except those aged 75+ with only pension/interest income) facing data discrepancies
- Minimal Impact: Returns with no refund or tax demand
Outlook for Taxpayers
For many taxpayers, the current delays may be less about irregularities and more about the legally permitted processing window that runs until December 31, 2026 for Assessment Year 2025-26. While this provides the department with adequate time to complete thorough verifications, it means taxpayers may need to wait considerably longer for their refunds than in previous years.
The stricter verification measures, while causing delays, are designed to ensure accuracy and prevent fraudulent claims, though they have significantly impacted processing speeds across various taxpayer categories.
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