/ INCOME TAX

Update on Income tax return Processing Transparency

Suscess ITR

Update on Income Tax Return Processing Transparency

Just two days ago, during our live session, we highlighted that only 95k ITRs had been processed—despite over 55 lakh filings already being recorded. Now, the Income Tax Department has removed the Income tax return processed count from its official website.

This move raises serious concerns. As Income tax professionals & responsible Income tax taxpayers, Taxpayer firmly demand transparency. Accurate, real-time disclosure of return processing data is crucial to building trust and ensuring accountability in Income tax system. Moreover, Taxpayer strongly urges the Tax dept to expedite the enablement of ITR-2, ITR-3, ITR-5, ITR-6, and ITR-7 to ensure all income tax taxpayer categories can comply within the due timelines.

Income Tax Return Filing Deadline Extended to September 15, 2025 (Non-Audit Cases)

The Central Board of Direct Taxes has officially extended the due date for filing Income Tax Returns (ITRs) for Assessment Year 2025–26 (FY 2024–25) : New Deadline: September 15, 2025, this extention is applies to Salaried individuals and taxpayers not liable for audit. The extension is a welcome move to support accurate, stress-free compliance amid system transitions. Use the additional time to ensure all your documents and financial details are in place before submission.

Why the Income tax extension?

According to the CBDT, the following key challenges necessitated the deadline extension:

  1. Revised ITR Forms: Major revisions aimed at simplifying compliance and improving transparency.

  2. Utility Development & Testing: Time required for seamless integration and testing of updated filing utilities.

  3. Delayed TDS Credit Visibility: Reflection of TDS (Form 26AS/TRACES) and related data began only in early June, limiting the effective filing window.

Implications for Taxpayers 

  • You now have extra time to file your return without penalty.

  • However, early filing is not always ideal unless all relevant data (TDS, SFT, Form 16) is available.

Our Recommendation: File After June 15 : 

We strongly advise taxpayers to wait until after June 15, 2025, to file their returns for the following reasons is Form 16/16A (TDS certificates) are typically issued by June 15. & SFT (Statement of Financial Transactions) data and Form 26AS are also updated around this time. and Filing early without these documents may lead to mismatches, delayed refunds, or rectification filings. 

Still Waiting for AY 2023–24 ITR Refund? There’s Good News!

In a CBDT circular dated June 9, 2025, the Income Tax Department has announced that all valid and unprocessed ITRs for Assessment Year 2023–24 (FY 2022–23) will be processed by November 30, 2025 — even though the standard processing deadline (December 31, 2024) has passed.

Who Benefits From This Extension?

  • Taxpayers who filed their ITRs on or before July 31, 2023, and whose returns were stuck in the system without processing, refund, or intimation, so no action is required on your part if your return was correctly filed and verified.

Possible Outcomes Once Processed:

  • Refund with interest (at 0.5% per month)

  • Tax demand if discrepancies are found

  • No refund or demand, just intimation of processing

Important Notes & Exceptions:

  • No refund will be issued if PAN is not linked with Aadhaar

  • Returns selected for scrutiny or delayed due to errors (e.g. wrong bank details) are excluded

  • No new tax demands under Section 143(1) can now be raised

  • Reassessment (Sec. 148) may still happen if there is evidence of undisclosed income

What You Should Do:

  •  Ensure PAN-Aadhaar linking is complete

  •  Ensure your bank account is validated on the e-filing portal

  •  Periodically check the ITR portal for status updates

  •  Do not file complaints or revised returns if everything was filed correctly

Relief for Millions:

This move offers relief to taxpayers who’ve been waiting for over a year for closure or refunds. It also helps the system clear backlogs while ensuring eligible taxpayers receive what’s due — with interest.

Income Tax Refunds Drop 16% — What’s the Bigger Picture?

Between April and 12th October, income tax refunds fell by nearly 16%, dropping from INR 2.4 lakh crore to INR 2 lakh crore. In contrast, net direct tax collections rose 6.3%, reaching INR 11.9 lakh crore — largely due to lower refund outflows.

  • Refunds down 16% between April and October 12, 2025.
  • Gross direct tax collections rose 2.4% to INR 13.9 lakh crore, supported by lower refund outflows.
  • Corporate tax collections grew 4.9%, while non-corporate tax rose 0.5%.
  • Refunds declined from INR 2.4 lakh crore (FY25) to INR 2 lakh crore (FY26).
  • Non-corporate refunds almost halved — from INR 1.2 lakh crore to INR 62,359 crore.

I-T Refunds Drop 16% Due to Checks Against Frauds – Positives

  • Stronger fraud prevention and data matching
  • Boost to tax buoyancy and revenue stability
  • Better liquidity for the government
  • Encouragement of accurate and transparent disclosures

What’s Driving This Shift? : The Income Tax Department has reportedly introduced stricter scrutiny and additional verification layers to detect fraudulent or inflated refund claims. While this improves tax compliance and fiscal integrity, it also raises important questions about the refund experience for genuine taxpayers.

Reason Behind the Fall

“Due to automated validation and additional risk-assessment checks at CPC to prevent incorrect refund claims, some refunds are taking additional time,” said a tax official. The Central Board of Direct Taxes (CBDT) has introduced:

  • Automated validation filters for refunds above a specified threshold.
  • Additional risk-based assessments before processing high-value claims.
  • These measures aim to curb fraudulent refunds and ensure data integrity in the system.

The move enhances transparency and compliance, but may slow down genuine refund processing.

  • Businesses and salaried taxpayers could see temporary liquidity strain due to delayed refund credits.
  • Stronger backend verification points to the government’s push for data-driven tax administration and fraud risk reduction.

Impact on Tax Collections

  • Net direct tax collections increased 6.3% to INR 11.9 lakh crore this year.
  • The fall in refunds directly boosted the net collection figure.

Concerns to Watch

  • Are genuine taxpayers facing slower refunds?
  • Is working capital getting locked up for businesses?
  • Could delayed refunds hurt MSMEs and salaried individuals?
  • Are IT systems scaling fast enough to handle deeper verification?

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