Income Tax Refund Stuck? Key Reasons Why Refunds Are Being Withheld in AY 2025-26

September 16, 2025, was the final extended statutory due date for Income Tax Return (ITR) filing for the financial year 2024-25. However, taxpayers still have not received their refunds.

Recently, the Central Board of Direct Taxes (CBDT) had sent some text messages/SMS to the taxpayers who filed ITRs for the AY2025-26. These messages were to inform taxpayers that their return processing has been kept on hold, as a few discrepancies have been caught in their refund claim under the risk management process.

Messages read, “AY: 2025-26 filed by you. Processing of the said return was held as it was identified under the risk management process on account of certain discrepancies in the claim of refund. An email with details has also been sent to your registered email address.

As the time limit for filing the revised return of income for A.Y. 2025-26 will expire on 31/12/2025, you are requested to avail yourself of the opportunity to file the revised return.”

As asserted by the Income Tax Department, the aforesaid messages were sent to taxpayers because of a few key reasons, like ineligible claims of deductions and exemptions and a significant gap between disclosures in the income tax returns and the information received from reporting entities.

Through this message, the Income Tax Department was trying to inform taxpayers that it is still not too late. They still have a chance to correct these mismatches by filing a revised return by December 31, 2025. The messages and emails are part of NUDGE (Non-Intrusive Usage of Data to Guide and Enable Campaign) of the Income Tax Department. Many messages are even informing taxpayers that their refunds have been stuck for more than six months.

Generally, as per past records, refunds are credited into the accounts of taxpayers within 4 to 5 weeks of filing a return. Following this timeline, most of the refunds should have already been released by the end of October.

The income tax refunds are released in cases where the paid tax amount exceeds the actual amount due through TDS or TCS or advance tax or self-assessment after considering all the deductions and exemptions.

Why Are Refunds Delayed This Year?

According to the reports, the Income Tax Department has received information from the “risk management framework” that some taxpayers are claiming “ineligible refunds” through deductions or exemptions that they are not entitled to, resulting in “understatement of income.”

Some significant discrepancies have been flagged by the Income Tax Department in the returns of taxpayers, resulting in their refunds being kept on hold. These key discrepancies are:

• “Bogus” donations to registered unrecognised political parties (RUPPs), with incorrect PANs of donees in some cases;
• Mismatch between tax deducted at source (TDS) and Annual Information Statement (AIS) reflecting higher income;
• Large deductions or ineligible claims;
• Non-disclosure of foreign assets or income.