• Notification Date: 15-10-2024
• Notification No: N/A

Finance Minister Sitharaman pursues action against delays in tax refunds

Finance Minister Nirmala Sitharaman referred taxpayers' complaints regarding delays in tax refunds to the Income Tax Department, auditors reported that some customers have also been affected. Though the government's digitalization initiative has helped speed up the tax refund process, some allege that excessive delays are occurring.  

Despite documentation being perfect, auditors claim that tax refunds are getting stuck. In some cases, they have been taken by surprise by the delays. Last year, the same group of customers (taxpayers) received faster refund credits, but this year the agency has not provided any notice. We checked, and everything seems to be in the right place. Karan Batra, founder and auditor at Chartered Club, said, "We have not found any valid reason for the refund to be delayed." There were issues like the sharing of incorrect bank account details since taxpayers received their refunds in the same account last year.  

These delays cannot be due to this. Moreover, if this was the case, the IT department would have informed the taxpayers. Around 5% of my clients experience delays with no clear reason. Batra said this was not an issue last year. Lack of response from tax authorities is a concern for taxpayers and tax officials." In various cases, the Central Processing Centre (CPC) has issued notice orders under Section 143(1) and accepted the refunded revenue.  

But the refund is yet to be deposited in the taxpayer's bank account. Taxpayers sometimes receive notices that their bank accounts are invalid even when the bank account details have not been changed. In the latter case, taxpayers will have to re-authenticate their bank accounts and submit refund reissue applications online.  

Tax authorities feel that the IT department needs to improve communication. The fear comes from communication breakdown. Some are concerned that their tax returns may have been investigated. According to Batra, a prompt intimation that the income tax return (ITR) is being processed along with a proposed timeline can help allay fears.  

General explanation for tax refund delays   

Processing of ITR and refunds can become difficult if the information in the return differs from that in the AIS (annual information statement) or Form 26AS (tax credit statement). Another important factor that can impede the issuance of refunds is ongoing assessment proceedings. According to Mohanka, "In certain circumstances where the taxpayer is a partner in a firm, the I-T department may withhold the refund till the partnership firm return is processed to ensure finality." 

However, there could be more common causes. One of the most common reasons why tax refunds get stopped is incorrectly entered bank account details that need to be filled in with the tax return. The IT department has said that if your bank isn't pre-verified, your tax return may not proceed with processing. You have to complete this mandatory process before you can file your taxes. Similarly, if the name on your bank account doesn't match with your PAN information, your refund request may be rejected. If you accidentally enter an incorrect IFSC code for your bank account or if the bank account you have selected for refund is closed, this will result in a delay in processing.  

Further, a portion of your tax refund may be deducted from your unpaid tax. In such situations, the status will be "Processed and partial refund adjusted," but the refund amount and settlement date will be displayed. Thereafter, the full amount of the refund you requested may be deducted from your unpaid tax.    

In such situations, the update "Refund processed and full refund adjusted" will be displayed. Your refund request may be rejected, or the refund may not be credited to your bank account. In this case, the date of the error and the reason for the error will be displayed. For example, if your PAN is not linked to your Aadhaar number and is not active, the website will inform you and ask you to complete the transaction after paying a penalty fee of Rs 1,000 under Section 234/H.