If you are still checking your bank account for an income tax refund for Assessment Year (AY) 2025-26, you are not alone. Data available on the Income Tax Department website shows that around 61 lakh income tax returns are yet to be processed as of January 6, 2026. This also means that lakhs of taxpayers among them are still waiting for their refunds.
While such delays often make taxpayers anxious—especially after the December 31 deadline for belated returns—experts say the situation, though frustrating, is legally permissible.
Tax department has time till December 31, 2026
One key point that has emerged from expert interactions is that the tax department is well within its rights to take time.
As explained by Vivek Jalan, Partner, Tax Connect Advisory Services, under Section 143(1), the Income Tax Department has time till 31 December 2026 to process returns filed for FY 2024-25.
This means that even after the belated and revised return deadlines are over, the department still gets a one-year window to complete processing.
He also points out that delays beyond December 31 are not uncommon, as there is no penal consequence for the department during this one-year period, except for paying additional interest at 0.5% per month on the refund amount under Section 244A of the Income-tax Act, 1961.
How refund interest is calculated
The interest payable on delayed refunds depends on when and how the tax was paid.
In most cases, interest is calculated from the date of tax payment or the date of filing the return (whichever is later), up to the date the refund is actually issued. For instance, if excess self-assessment tax was paid on July 31 and the refund is received on December 15, interest would be calculated for five months at 0.5% per month.
However, there is an important caveat: no interest is payable if the refund amount is less than 10% of the total tax paid during the year.
Why are so many returns still unprocessed?
According to Jignesh Shah, Partner – Direct Tax, Bhuta Shah & Co LLP, around 7.80 crore ITRs have already been processed, but the backlog of unprocessed returns at this stage is higher than usual compared to previous years.
Several factors are contributing to the slowdown.
1. Data mismatches and enhanced verification
Returns showing discrepancies between ITR data and information available with the tax department—such as Form 26AS, AIS and TIS—are taking longer to clear. According to Shah, this year has seen intense verification procedures, which has delayed both processing and refund determination.
2. High-value and complex cases under scrutiny
Returns involving high refunds, large exemptions or complex income structures are being subjected to deeper, risk-based checks. This naturally increases the processing time.
3. Delayed release of ITR forms
The ITR forms were released later than usual, and the due date for filing returns was extended from July 31, 2025 to September 15, 2025. This compressed the time available for the department to process returns, creating a backlog.
4. Structural changes and portal update
The new ITR forms introduced significant structural changes, including detailed capital gains reporting, landlord PAN for HRA claims, and home loan disclosures. These changes required repeated system updates. At the same time, backend upgrades to the e-filing portal have led to technical issues and slower performance, further delaying processing.
5. NUDGE campaigns and compliance checks
The tax department also rolled out Non-intrusive Usage of Data to Guide and Enable (NUDGE) campaigns—one on foreign asset reporting in November 2025 and another in December 2025 focused on fake donation claims. These additional compliance checks have added to the delay.
6. Taxpayer-related errors
Common issues such as failure to e-verify returns, invalid or unvalidated bank accounts, and non-response to proposed adjustments are also holding up processing in many cases.
Who is facing longer delays?
The delay is not uniform across all taxpayers.
Salaried individuals usually see quicker processing, but those claiming high refunds or reporting deductions beyond what is mentioned in Form 16 are seeing delays.
Senior citizens (other than those aged 75+ with only pension and interest income, who are exempt from filing) are facing similar issues where mismatches exist.
Refund-claiming taxpayers with large or mismatched claims are more affected compared to cases with “no demand, no refund”.
Will you get interest if the refund is delayed?
Yes, but subject to conditions. As explained by Shah, under Section 244A, the department must pay simple interest at 0.5% per month on delayed refunds.
If the return is filed within the due date, interest is payable from 1 April of the assessment year till the refund is granted.
If the return is belated, interest is calculated from the date of filing till the refund date.
However, interest is payable only if the refund is at least 10% of the total tax liability and the delay is not attributable to the taxpayer, such as incorrect bank details or failure to respond to notices.
What should taxpayers do now?
While the long wait can be unsettling, experts suggest ensuring that your return is e-verified, bank account details are validated, there are no mismatches between ITR data and Form 26AS/AIS, and any pending communication or proposed adjustment is responded to promptly.
For many taxpayers, the delay may simply be a matter of time—and legally, that time can extend up to December 31, 2026 for AY 2025-26 refunds.