Over 5 Million Tax Refunds Still Pending: Why ITR Processing Is Delayed and What Taxpayers Should Do Now

Despite crores of income tax returns being processed this year, a significant number of taxpayers are still waiting for their refunds. For Assessment Year (AY) 2025–26, delays in Income Tax Return (ITR) processing have become a major concern, especially for those whose returns have already been filed and verified. According to official data, more than 5 million refund-related cases remain stuck, leaving taxpayers anxious and confused about the reasons behind the slowdown.

Current Status of ITR Processing for AY 2025–26

As per figures released by the Income Tax Department, around 8.8 crore ITRs had been filed for AY 2025–26 by January 11. Out of these, nearly 8.68 crore returns were successfully verified, and about 8.15 crore returns had already been processed. However, approximately 53 lakh returns are still pending at the processing stage. A large proportion of these pending cases involve taxpayers who are eligible for refunds.

This has raised a common question among taxpayers: if the return has been filed and verified, why is the refund still not credited?

Why Is ITR Processing Slower This Year?

The primary reason for the delay is the stricter scrutiny process adopted by the Income Tax Department. This year, returns claiming unusually high or irregular refunds are being examined more closely. Unlike earlier years, returns are no longer cleared only through automated systems. Many cases are being selected for manual verification, which naturally takes more time.

Role of Data Analytics and Risk-Based Filters

One of the biggest changes this year is the expanded use of advanced data analytics and automated risk filters. If there is a mismatch between the income declared in the ITR and the data available in AIS (Annual Information Statement) or Form 26AS, the system automatically flags the return. Once flagged, the processing is paused until the issue is clarified.

Taxpayers may be asked to revise their returns or provide explanations, which further slows down the automated processing cycle. As a result, the overall pace of refund issuance has reduced compared to previous assessment years.

Additional Factors Contributing to Refund Delays

Another important reason for the delay is the second phase of the NUDGE initiative launched by the Central Board of Direct Taxes (CBDT). Under this initiative, the department is closely examining foreign income and foreign asset disclosures. Using AEOI (Automatic Exchange of Information) data for FY 2024–25, tax authorities are verifying whether taxpayers have accurately reported overseas income or assets.

Returns that raise any suspicion during this verification are subjected to enhanced scrutiny, which leads to further delays in processing and refund issuance.

Apart from this, the extension of ITR filing deadlines also played a role. The due date for filing returns was extended twice—from July 31 to September 15, and then again to September 16, 2025. This resulted in a sudden surge of return filings in September, putting immense pressure on the processing systems.

Data mismatches from banks, employers, mutual funds, and other reporting entities have also contributed to slower processing. In refund-heavy or complex cases, tax officials are now reviewing returns at an individual level rather than relying solely on automation.

Options for Taxpayers Who Missed the Filing Deadline

Taxpayers who could not file their returns within the prescribed timeline had the option to submit a belated return until December 31, 2025. That deadline has now passed. The only remaining option is to file an updated return under Section 139(8A) of the Income Tax Act.

However, this option is not meant for claiming or increasing refunds. It is mainly for declaring missed income or correcting errors and may involve additional tax payments and penalties.

What Should Taxpayers Waiting for Refunds Do?

If your return has been filed and verified but is still under processing, there are a few steps you should take:

• Regularly check your ITR status on the official income tax portal.

• Ensure that your bank account is pre-validated and linked with PAN.

• Respond promptly to any emails, SMS alerts, or notices from the Income Tax Department.

• Verify that the details in AIS and Form 26AS match your return. If corrections are allowed, consider filing a revised return without delay.

Final Word

With tighter scrutiny, improved compliance checks, and enhanced data matching, income tax refunds may take longer than usual this year. While the wait can be frustrating, staying alert, keeping documents updated, and responding promptly to department communications can help avoid unnecessary delays. In this new era of stricter tax administration, informed and proactive taxpayers are more likely to receive their refunds smoothly, even if it takes a little extra time.