Lower income tax refunds India 2025–26 have become a major concern for taxpayers this year. Many individuals who expected a higher refund have either received a lower amount or are still waiting for their money, even though overall tax collections in India have increased.
This situation has raised obvious questions:
Why are refunds falling when tax collections are rising?
Is there something wrong with your tax return?
And most importantly—what should taxpayers do next?
This article explains the issue in simple language, backed by facts, and gives you clear steps to avoid refund problems.
Income Tax Refund Trend: What the Numbers Show
Recent official data indicates a clear shift in refund patterns.
Income Tax Refund Comparison
| Financial Year | Refunds Issued (₹ lakh crore)* |
|---|---|
| FY 2024–25 | ~3.75 |
| FY 2025–26 | ~3.12 |
This reflects a drop of nearly 17% in refunds.
At the same time, gross direct tax collections increased, which shows that the decline in refunds is not due to lower tax payments, but due to stricter processing and verification.
Why Income Tax Refunds Are Lower or Delayed in 2025–26
1. Advanced Data Matching & Scrutiny
The Income Tax Department now uses data analytics to cross-verify your return with:
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Form 26AS
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Annual Information Statement (AIS)
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Bank interest and other third-party data
Even small mismatches can trigger manual checks, slowing down refunds or reducing amounts.
2. Detection of Inflated or Incorrect Deductions
Authorities are actively identifying:
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Inflated HRA claims
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Incorrect home loan interest deductions
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Questionable donation claims
If deductions don’t match supporting data, refunds are either reduced or withheld.
3. CBDT “Nudge” Campaign
Taxpayers are receiving emails and SMS alerts asking them to review discrepancies.
Until you:
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Accept the variation, or
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File a revised return
Refund processing remains on hold.
4. Common Taxpayer Mistakes
Many refund delays are self-inflicted due to:
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ITR not e-verified within time
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Bank account not pre-validated
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PAN–Aadhaar mismatch
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Incorrect IFSC or account details
An unverified or incorrect return is treated as invalid.
5. Adjustment Against Old Tax Dues
If there are pending tax demands from earlier years, the department can legally adjust your refund against those dues.
This often results in:
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Lower refunds
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Or no refund at all
6. System & Processing Backlog
A large number of returns are still under processing, and legally the department has time to process refunds up to December 2026 for AY 2025–26.
So delays, though frustrating, are within permitted timelines.
What Taxpayers Must Do If Refund Is Lower or Delayed
Step-by-Step Checklist
1. Check Refund Status
Log in to the Income Tax e-filing portal and check:
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Return status
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Refund remarks or notices
2. Reconcile Your ITR
Match your return with:
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Form 16
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Form 26AS
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AIS
Correct mismatches immediately.
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3. E-Verify Your Return
If not verified, your return will not be processed.
4. Validate Bank Account
Ensure:
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Account is pre-validated
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Name, IFSC, and account number match
Refunds are issued only to validated accounts.
5. Respond Quickly to Notices
If you receive any communication:
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Respond promptly
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File a revised return if required
Delays here mean delayed refunds.
6. Clear Outstanding Dues
Check for pending demands and resolve them to avoid refund adjustment.
7. Raise a Grievance If Needed
If there’s no update for a long time:
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Raise a grievance on the portal
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Or contact the Income Tax helpline
Example: How a Small Mismatch Affects Refund
A salaried taxpayer claimed ₹1.5 lakh under deductions, but the donation details were not reflected in AIS.
Result: The return was flagged, refund reduced, and processing delayed until clarification.
Why This Trend May Continue
Experts believe the focus is shifting towards:
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Accurate tax collection
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Reduction of fake claims
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Greater transparency
This means refunds may remain lower but more accurate going forward.
Final Thoughts: What Taxpayers Should Remember
The lower income tax refunds India 2025–26 situation does not mean something is wrong with every return. It signals a system that is becoming more data-driven and strict.
Key Takeaway
File accurate returns
Avoid aggressive deductions
Verify and respond quickly
Keep documents aligned with AIS & 26AS
A clean return today means faster refunds tomorrow.