Expect Delays: Income Tax Refunds to Be Slower This Year
Thank you for reading this post, don't forget to subscribe!Taxpayers with diverse income streams, including those with capital gains or business income, should prepare for potential delays in their income tax refunds this year. The primary culprits are the late release of crucial ITR-2 and ITR-3 forms and a new, more stringent verification process by the Income Tax Department.
As of July 4, 2025, the ITR-2 and ITR-3 forms—essential for individuals with complex financial profiles—are still not available on the e-filing portal. This delay is a major setback for timely filings and, consequently, refund processing. The Central Board of Direct Taxes (CBDT) has already extended the filing deadline to September 15, 2025, acknowledging the significant technical modifications needed for these forms due to changes introduced by the Finance Act, 2024.
Why the Hold-Up?
- Delayed Form Releases: The ITR-2 and ITR-3 forms, which are more intricate than ITR-1 and ITR-4, require extensive technical modifications to align with new reporting requirements. This has pushed back their availability on the e-filing portal.
- Stricter Verification: The Income Tax Department is implementing a rigorous verification strategy to combat fraudulent claims. This involves reviewing past assessment records and previous ITRs. Tax officials have been instructed to halt new refunds if any scrutiny or assessments from prior years are pending.
- Late Start to Filing Season: The filing season began nearly a month later than usual, compressing the time taxpayers have to file their returns and for the department to process them.
- Lack of Transparency: There’s a notable absence of official updates and processed ITR data on the department’s website. This lack of clear communication is causing considerable confusion and anxiety among taxpayers who are left in the dark about their refund status.
- Backend Upgrades: Ongoing system upgrades by the department, while aimed at improving data accuracy, have resulted in limited visibility on the e-filing portal regarding processing and refund statuses.
What This Means for You
These delays will disproportionately affect individuals with complex financial profiles, as they cannot file their returns until the specific forms are released. Even for the over 75 lakh returns already filed (with about 71.1 lakh e-verified), the enhanced backend verifications mean longer waits for refunds. While the stricter approach aims to prevent fraud, it can inadvertently create hurdles for honest taxpayers.
What Should Taxpayers Do?
- File Promptly: Once the ITR-2 and ITR-3 forms are available, file and e-verify your returns as soon as possible to mitigate further delays.
- Ensure Accuracy: Double-check all disclosures to avoid any discrepancies that could trigger additional scrutiny.
- Stay Informed: Regularly monitor the e-filing portal for updates on form availability and the status of your return.
- Prepare Documents: Use the extended deadline to gather all necessary documents like Form 16, bank statements, and capital gains statements, to be ready to file efficiently once the utilities are live.
Despite the challenges, a proactive and accurate approach to filing will be key to a smoother process this tax season.
