Eight common reasons for income tax refund delays and how to avoid them

Generally, the income tax department is quick in processing refunds, taking 4-5 weeks for the refund to be credited to the taxpayer's account. However, several issues can cause unexpected delays. From errors in your tax return to mismatches in Form 26AS, taxpayers should understand these possible reasons and stay proactive to ensure all details are accurate. Promptly addressing any discrepancies can help expedite the refund process.

Eight major reasons for delay in Income Tax Refund

Errors in tax return

Mistakes or discrepancies in tax returns, such as incorrect Aadhaar numbers, income amounts, or deductions, can delay processing. These errors include selecting the wrong ITR form or errors in disclosing tax deposit details.

Mismatch in Form 26 AS/AIS/Form 16

Discrepancies between the tax deducted at source (TDS) information in your return and Form 26AS, Annual Information Statement (AIS), or Form 16 can delay your refund. Any mismatch in TDS details needs clarification, and refunds will not be issued until the information matches the tax department's records.

Form 26AS summarises all taxes paid under your PAN number, and discrepancies here can lead to delays. AIS provides a comprehensive view of the information displayed in Form 26AS for a taxpayer.

Incomplete documentation and false claims

Claims for deductions or credits requiring additional documentation may delay your refund until the necessary documents are provided and verified. Overstated refund claims due to false information can also cause delays, as the tax authority will identify the error, issue a notice for repayment, and scrutinise returns. Always ensure that only legitimate and accurate claims are made to avoid unnecessary delays and potential legal issues.

Outstanding taxes and debts

If you owe back taxes or other debts to the government, your refund may be used to offset these amounts. Additionally, if you have taxes due from a previous year, your current refund may be applied to settle the old balance. The income tax department can withhold all or part of your refund to cover these outstanding debts.

Incorrect bank account details

Providing incorrect bank account information for a refund deposit can delay your refund. Always ensure your bank details are accurate and pre-validated with matching details on your PAN card. The electronic clearing system (ECS) has expedited refunds but also increased the importance of providing correct bank credentials.

Reconfirm the bank details entered while filing your taxes, and ensure your account is pre-validated on the income tax e-filing portal. The name on your bank account must exactly match the name on your tax return. If names don't match or if there are changes in the IFSC code, update and pre-validate your bank details accordingly. It is mandatory to provide details of only PAN-linked bank accounts.

Return under scrutiny

The Income Tax Department may select your return for scrutiny to ensure accuracy, which can delay the refund process until the assessment is complete. Not responding promptly to notices from the Income Tax Department can also delay your refund, so timely responses are crucial.

Identity theft or fraud

If your identity has been compromised or someone has filed a fraudulent return using your information, processing your legitimate refund may divert to the fraudster’s account.

E-verification of ITR

E-verifying your income tax return within 30 days of filing is mandatory; without verification, your return will not be processed. While online verification is faster, opting for postal verification can add days to the process. Ensure prompt e-verification to expedite your refund.

Conclusion

Taxpayers should be diligent while filing income tax returns to receive the income tax refund hassle-free. However, if the taxpayer does not receive the income tax refund within the expected 4-5 weeks from the filing date, it’s important to investigate the possible reasons causing the delay. Therefore, taxpayers should check any notifications from the department regarding discrepancies in the return and address these issues promptly to expedite the refund processing.