Income tax refund delay: As refunds fall 19% in FY25-26, Minister reveals reasons in Parliament

Feb 12, 2026

CBDT releases latest income tax refund data for FY25 and FY26

The Income Tax (I-T) Department has released the data of direct tax collections for the Financial Year 2025-26 as on February 10, 2026, which also includes tax refunds issued. The data shows that the Central Board of Direct Taxes (CBDT) collected significantly lower refunds in FY 25-26 compared to the Financial Year 2024-25.

Income tax refund payout falls nearly 19% year-on-year

As on February 10, 2025, tax refunds for FY 2024–25 stood nearly Rs 4.12 lakh crore. Tax refunds for FY 2025–26 stood at Rs 3.34 lakh crore. This shows a 18.82% YoY drop in tax refunds.

Rajya Sabha MP raises concerns over tax refund delays for taxpayers

In an unstarred question, Rajya Sabha MP Deepak Prakash asked Pankaj Chaudhary, Ministry of Finance, Minister of State, about precise reasons for putting on hold income tax returns of ‘honest’ taxpayers, specially of senior citizens.

Prakash also asked about how many such returns are pending with the Income Tax (I-T) Department as on January 31, 2026, which are more than 90 days old.

Government explains refund delays citing NUDGE data analytics campaign’s scrutiny

Responding to the query, Chaudhary clarified that these delays are happening because the Central Board of Direct Taxes (CBDT) has undertaken NUDGE (Non-intrusive Usage of Data to Guide and Enable) campaigns which are extensive technology-driven initiatives that leverage data analytics.

“Under these campaigns, communications are sent to select taxpayers to review and revise/ update their ITRs already filed. The taxpayers are selected on the basis of advanced risk analysis identifying incorrect or non-reporting of assets or income, or excess claims of deductions or exemptions in their ITRs,” says Chaudhary.

The Minister further explains the taxpayers are selected on the basis of advanced risk analysis identifying incorrect or non-reporting of assets or income, or excess claims of deductions or exemptions in their ITRs.

“The select taxpayers are mainly those who have not disclosed their foreign asset holdings or income or have claimed incorrect deductions u/s 80 G, 80GGC or 80E, etc, or have claimed excess exemptions,” says Chaudhary.

Chaudhary presented the data of the SAKSHAM NUDGE campaigns in last two years. The data is as follows

* Number of updated/revised ITRs filed: 1.11 crore

* Additional tax paid in updated ITRs under Section 140B: ₹6,976.50 crore

* Total refund claim amount reduced/additional tax paid (December 2025): ₹1,834.09 crore

* Revenue impact of the campaign: ₹8,810.59 crore

Over 24 lakh tax returns pending beyond 90 days, reveals govt data

Prakash also sought clarification on the number of such refunds pending with the I-T Department as on January 31, 2026, which are more than 90 days old.

In his reply, Chaudhary clarified that out of a total number of 8,79,62,234 ITRs filed for A Y 2025-26 by the taxpayers till February 4, 2026, returns pending for processing for more than 90 days are 24,64,044.

This means while nearly 8.8 crore tax returns have been filed, about 24.64 lakh returns are still waiting to be processed even after three months.

Stricter data checks curb false deductions, say tax experts

Abhishek Soni, founder and CEO, Tax2Win, says, the recent drop in tax refunds alongside the increase in gross collections shows that the Income Tax Department is getting better at detecting fake deductions and income misreporting.

“With more accurate data checks and a rise in notices issued, taxpayers are now less able to claim false deductions or hide income. This has helped boost genuine tax collections and reduce unnecessary refunds, leading to a healthier and more transparent tax system,” says Soni.

Targeted scrutiny flags incorrect income reporting and excess deduction claims

Under these campaigns, communications are sent to select taxpayers based on risk analysis that identifies incorrect or non-reporting of assets or income, excess deductions, or wrong exemption claims, including cases related to foreign assets and Sections 80G, 80GGC, and 80E.

[The Economic Times]