Income Tax Refunds at Risk If Returns Processed Late

• December 31, 2025 is the last date to file a revised return for AY 2025–26
• Errors flagged after this date can delay or reduce refunds
• CPC mismatches with AIS, TIS and Form 26AS are common triggers
• Rectification, not revised return, may be the only option after deadline

GG News Bureau
New Delhi, 23rd Dec: Taxpayers expecting income tax refunds for the assessment year 2025–26 could face complications if their returns are processed late by the Income Tax Department’s Centralised Processing Centre (CPC), tax experts have cautioned.

While December 31, 2025, is the statutory deadline to file a revised return, a large number of original income tax returns (ITRs) are still pending processing. If CPC processes a return after this date and flags discrepancies, taxpayers lose the option to revise their returns, potentially putting legitimate refunds at risk.

Once an ITR is processed, CPC automatically cross-verifies details with Form 26AS, the Annual Information Statement (AIS) and the Tax Information Summary (TIS). Even minor mismatches—such as differences in TDS or TCS, unreported bank interest, incorrect capital gains, or errors in deduction claims—can result in refund delays or reduced payouts.

Parag Jain, Tax Head at 1 Finance, said many taxpayers rely entirely on pre-filled data, which is not always accurate. “Because CPC processing is system-driven, even small discrepancies can convert genuine refunds into tax demands, delaying refunds for months,” he said.

Ritika Nayyar, Partner at Singhania & Co., noted that procedural lapses such as failure to pre-validate bank accounts, incomplete deduction schedules, or simple calculation errors can also hold up refunds. If an error is identified after December 31, 2025, taxpayers can no longer file a revised return.

In such cases, relief depends on the nature of the error. A rectification request under Section 154 can be filed if the mistake is due to a clerical or system error by CPC, such as ignoring TDS already reflected in Form 26AS. However, rectification cannot be used to correct omissions or underreporting by the taxpayer.

An updated return (ITR-U) is applicable only where income was underreported and additional tax is payable. Experts clarified that ITR-U cannot be filed to claim higher refunds or reduce tax liability and also attracts additional tax and interest.

For refund claims wrongly denied due to CPC errors, rectification remains the primary remedy. If returns remain unprocessed close to or beyond December 31, 2026—the outer limit for CPC processing—experts recommend proactive steps. These include checking e-verification and bank validation status, responding to pending notices, filing grievances through the e-Nivaran portal, and escalating matters to the jurisdictional assessing officer.

Experts warn that delayed processing can effectively deny taxpayers the opportunity to correct minor errors. “There is no explicit legal safeguard against refund loss caused purely by departmental delay,” Jain noted, adding that existing remedies are largely reactive.

For taxpayers awaiting refunds, professionals advise close monitoring of return status and early action. After December 31, 2025, options to correct errors narrow sharply, making timely follow-up critical.