Income Tax: Income tax refund delayed or cancelled? The Income Tax Department has provided a major update...

The wait is getting longer for a large number of salaried taxpayers who are expecting an income tax refund for the Assessment Year 2025-26. This has raised concerns that their refunds might have been canceled. However, the Income Tax Department has clarified this misconception. The department has temporarily halted refund processing in cases where the exemption claims made in the tax return do not match the salary details provided by employers in Form 16.

This information came to light through emails sent directly to taxpayers, warning that due to a large number of refund claims, the department has initiated an internal risk check.

What went wrong with the ITR and Form 16?
The message sent by the Income Tax Department mentions a "significant discrepancy" between the exemptions claimed in the ITR form and the figures reported in Form 16 (Annexure II). According to the department, such discrepancies have inflated the refund amount, leading to the returns being held up before processing.

'Refunds paused, not rejected.'
Experts have clarified that the Income Tax Department has paused the processing of refunds, but they have not been rejected. The refund will be processed after the mismatch is corrected or explained. Whenever there is a discrepancy between the details provided in the ITR and the financial data received by the tax department, an automated email/SMS is sent to the taxpayer.

What should taxpayers do now for their refunds?
Experts advise all taxpayers to verify that all claimed exemptions, such as House Rent Allowance, Leave Travel Allowance, or deductions, are fully supported by documents and are reflected in Form 16 issued by their employer. Meanwhile, the Income Tax Department has warned in an email that if no action is taken, this behavior may be considered deliberate, which would increase the likelihood of a more detailed investigation into the matter.

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