Finance Minister Nirmala Sitharaman stated in the Rajya Sabha that taxpayers are receiving refunds in 10 days of filing their income tax returns. While this is true in some cases, it does not apply universally. The speed of receiving a refund varies based on several factors, such as the type of ITR form filed, the complexity of transactions and the timing of the filing. For instance, refunds might be delayed if the return was filed close to the deadline.

Sitharaman announced that the average time to process income tax returns (ITR) has dropped from 93 days in FY 2013-14 to just 10 days in FY 2023-24.

“Income Tax Refund is something on which CBDT has been working in a systematic manner and we have consistently improved our performance in the last three years. The average processing time of returns has been reduced from 93 days in 2013-14 to 10 days in 2023-24,” she said.

She mentioned instances where some taxpayers have received their tax refunds within 7 days, highlighting the significant improvements in processing speed.

Also read: Income Tax Refund Delays: Here’s why your refunds are stuck and how long Income Tax Dept can legally take

Not all ITRs are going to be processed in 10 days

There is no denying that the speed of tax refunds has significantly improved over the years, especially in the last three years. However, the claim that refunds are processed within 10 days is not accurate for all cases. The complexity of the ITR form plays a crucial role in processing times: ITR-3 is more complex than ITR-2, and ITR-2 is more complex than ITR-1, leading to longer processing times for more complicated returns.

Refund claims for ITR-1 are typically prioritized, followed by ITR-2 and ITR-3, reflecting the simplicity or complexity of the income reported. Generally, refunds for ITR-1 are processed and received by taxpayers within a few days if there are no defects or adjustments. However, returns filed close to the deadline might experience delays. On the other hand, refunds for ITR-2 and ITR-3, assuming they are free of defects or adjustments, usually take a couple of months to be processed and received.

“Simpler forms like ITR-1 or ITR-4 are usually processed faster compared to ITR-2 or ITR-3,” Akhil Chandna, Partner, Grant Thornton Bharat, said.

“Discrepancies in the data provided in the tax return, such as mismatches in reported income or tax credits may require re-verification by taxpayer post communication from the tax department,” Chandna added.

Also read: Are taxpayers allowed to switch tax regime after mid-year budget changes?

How the Centralized Processing Centre transformed tax refund process

Around 15 years ago, receiving tax refunds typically took 6 to 9 months after filing an ITR. However, the establishment of the Centralized Processing Centre (CPC) in the early part of the last decade brought significant improvements. As a result, the processing time has accelerated, and many taxpayers now receive their refunds within a few days of filing their returns.