🚨 Why Your ITR Refund Is Delayed: A Deep Dive into CBDT's 'Red-Flagged' Claims

 

The Central Board of Direct Taxes (CBDT) Chairman, Ravi Agrawal, has addressed the growing anxiety among taxpayers regarding delayed Income Tax Return (ITR) refunds for Assessment Year 2025–26 (Financial Year 2024–25). The official stance confirms that the delay is intentional and due to a process of intensive analysis on claims that are either "high-value" or have been "red-flagged" by the department's automated risk management system.

While low-value, straightforward refunds have been processed quickly, the department has found evidence of "wrongful deductions" being claimed, necessitating a slower, more rigorous verification process for suspicious cases. Legitimate refunds are assured to be cleared by December 2025.

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1. Defining the 'Red-Flag' Mechanism

A 'red-flagged' ITR is one that is pulled out of the automated processing stream (Section 143(1)) and is routed for manual scrutiny or deeper evaluation. The purpose is to prevent the disbursement of erroneous refunds and protect government revenue.

The system flags a return when the data filed by the taxpayer does not align with the comprehensive information the department already holds.

Common Triggers That Cause Delays

Trigger Category	Specific Discrepancy	Impact on Refund Processing
Data Mismatch	Income/TDS/TCS claimed in ITR is different from the amount reported in AIS/TIS/Form 26AS.	The system defaults to the higher income or lower credit amount, automatically adjusting the refund and issuing a Section 143(1) Intimation.
Excessive Claims	Unusually large deductions claimed under sections like 80C, 80D, or 24(b) (Home Loan Interest), particularly if the claims are disproportionate to the income level.	Flags the return for manual verification to check for documentary evidence.
High Refund Value	The refund amount is exceptionally high compared to the taxpayer's annual tax liability or previous year's refund history.	Automatically triggers a risk-based audit to ensure the claim is genuine.
Incomplete Verification	Return is filed but e-verification (through Aadhaar OTP or Net Banking) is pending, or the bank account for credit is not pre-validated.	The return remains unprocessed or the refund fails to be credited.

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2. The Taxpayer's Urgent Action Plan

If your refund is among the pending 92 lakh-plus ITRs, every day counts. You must proactively investigate the cause of the delay.

A. Check Your ITR Status (The First Step)

Use the official portals to check the exact status of your ITR processing.

ü  Income Tax Portal: Log in → e-File → Income Tax Returns → View Filed Returns → View Details.

ü  NSDL-TIN Website: Check status using your PAN and Assessment Year.

B. Download and Analyze the 143(1) Intimation

If the status shows 'Processed' but the refund amount is lower or delayed, download the Section 143(1) Intimation. This notice is the department's final computation and will clearly explain:

ü  The exact mismatch (e.g., income addition or deduction disallowance).

ü  The revised tax payable or refund amount.

C. Correct the Error (If Applicable)

The CBDT Chairman explicitly mentioned advising taxpayers to file a revised return if they have forgotten or wrongly reported something.

ü  If your refund is delayed because of a verifiable mistake (like missing income), file a Revised Return immediately to correct the figures and clear the system's flag.

ü  If the mismatch is due to your deductor (e.g., employer) failing to update your TDS in Form 26AS, follow up with the deductor to file a Revised TDS Statement.

D. Ensure Bank Validation

A refund cannot be credited unless the designated bank account is pre-validated on the e-filing portal. Confirm that your PAN and bank account details are in sync and active.

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3. The Silver Lining: Interest on Delayed Refunds

While the wait is frustrating, genuine taxpayers can take relief in knowing the law protects them.

According to Section 244A of the Income Tax Act, the department is liable to pay simple interest on delayed refunds.

ü  Interest Rate: Interest is typically calculated at a rate of 0.5% per month (or part of a month) or 6% per annum.

ü  Start Date: The interest accrues from the date the refund becomes due, generally after the expiration of the processing period or from the date of filing the return (if filed after the due date), whichever is later.

Crucially, if the delay is caused by an error or omission by the taxpayer (e.g., wrong bank details, delayed e-verification), the interest clock may stop or not start until the error is rectified.

The current emphasis on scrutiny is a step toward better transparency and reduced future litigation. By ensuring the accuracy of your original filing and responding promptly to any departmental communication, you can ensure your legitimate refund is credited by the promised timeline.