ITR Refunds: Common Reasons Behind Delayed Returns, Here's What You Should Do

Filing an income tax return (ITR) in due time is just the first step in the process of tax compliance by a taxpayer. For most, the moment culminates with the credit of their tax refunds. However, taxpayers should know that it is not uncommon for refunds to get delayed which often results in concern and confusion. Understanding the reasons behind these delays and knowing the appropriate steps to take can help alleviate some of this stress.

Here are four common reasons that may delay your returns:

1. Wrong Bank Details: One of the most common reasons behind the delay in refund is the submission of incorrect bank account details. The I-T department can’t process or initiate the refund if there is a mismatch in the bank account information.

2. Issues related to Verification: After filing, your ITR has to be verified within 120 days. Failure to verify will create problems with the processing of the return and thereby result in late refunds. 

“If a person has filed an ITR then they need to verify it within 30 days. ITR can be verified by Aadhar OTP, Net Banking, or by sending a hard copy of the acknowledgement to the CPC Bangalore address. In case verification is not done, the department will not process it therefore one should verify his ITR as soon as possible, the maximum limit is 30 days after which the ITR becomes invalid and is treated as a non-filed case,” CA Ashish Niraj informs.

3. Mismatch in Details Submitted: If the Income Tax Department finds discrepancies between the information you provided in your ITR and the details available with the authorities, your refund will be delayed. This could include mismatches in TDS details or income declarations.

4. Delay in ITR Processing: Sometimes, even if your return has been filed and verified correctly, the processing may get delayed due to a backlog or peak return outgo at the tax department.

CA Niraj notes these specific cases that may cause delayed returns:

1. ITR Processed, Refund ascertained but adjusted with Previous Year's Demands: In case you have old outstanding income tax demands pending from previous years, the department adjusts such demands with refunds. Demands are first adjusted with Interest on outstanding demand and the balance, if available is then adjusted with the Principal Part of Demand. 

Such Outstanding demands can be seen by logging in income tax portal and navigating to the “Response to Outstanding Demand” section under the “Pending Actions” Tab. 

2. Tax Credit Mismatch: Sometimes refund is held as the TDS Credit claimed in ITR does not match with 26AS or Processing is done without considering the correct TDS as appearing in 26AS. In such cases, Griviance can be raised under CPC-ITR Head.

What Should Taxpayers Do?

Case 1: Your ITR is processed, the refund was ascertained but failed due to a bank account-related issue.

Sometimes due to changes in Bank IFSC Code due to amalgamations of various banks etc, refund fails. “In that case, the assesee gets a mail from the Income Tax Department regarding the failure. Individual needs to update the Bank on the Income Tax Portal with the correct details and should raise a “refund reissue request” on the Income Tax Portal,” says CA Ashish Niraj, A S N & Company, Chartered Accountants,” says CA Niraj.

How to update bank account details for ITR Refund?

In case there is any update required in Bank Accounts then the assesee should go to the “My Bank Details” Section under the “ My Profile” Option and update the Bank Details. After that “Refund Reissue” request should be placed by navigating to the “ Refund Reissue” link under the “Services” Tab.

Case 2: Your ITR has been verified but not processed by the Department yet

Sometimes there is a delay from the Department’s end to process the ITR. Refund is disbursed only after processing. “If there is an inordinate delay in the processing of ITR then the assessee can log in to his income tax account and raise a ticket under the “Submit Grievances” Tab and Select “CPC-ITR” and then “Others Processing” to request early processing of ITR,” says CA Niraj.

For better compliance ensure the following:

• Track the Status: You can use the 'Refund Status' feature on the Income Tax Department's e-filing website or the NSDL website to track the status of your refund.

• Respond to Notices: If you receive any notice from the Income Tax Department, make sure to respond promptly with the required information or documents to avoid any penalty

• Raise a Grievance: If you believe your refund is delayed without any clear reason, you can raise a grievance through the e-filing portal.

How does the tax department communicate with taxpayers regarding delays or issues with their refunds?

In case of Refund Adjustment with demand or failure due to Bank issues etc, the department sends a mail with the subject “Refund Adjusted against Outstanding Demands” or “Your refund has failed, please raise a Refund Re-issue Request” respectively. These emails normally come from the email id intimations@cpc.incometax.gov.in.

What legal recourse do taxpayers have if they believe their refund is unjustly delayed?

If you have claimed a refund and the department processes ITR and disallows deduction/Expenditure then you can go to Income Tax Appeal against such Order.

Please note that the refunds are typically issued within 20-45 days after processing of ITR by the CPC Department of Income Tax. If you want to check your income tax refund status simply log in to your e-filing account. Go to ‘e-File’- ‘Income Tax Returns’- View Filed Returns’. Find the relevant assessment year for which you want to know the refund and check the ITR status.