As FM Sitharaman pushes for action on tax refund delays, CAs call for better I-T dept communication

Communication from the I-T department on reasons for tax refund delays can reduce tax-payers' anxiety, say chartered accountants

After Finance Minister Nirmala Sitharaman drew the income tax (I-T) department’s attention to a taxpayer's grievance over tax refund delay, chartered accountants say several of their clients too are affected.

While the tax refund process is largely faster than earlier and the government’s digital push has helped, some taxpayers are facing inordinate delays, they say.

Inadequate I-T dept communication a concern

Chartered accountants say that tax refunds are stuck despite foolproof paperwork. “In some cases, the delays have taken us by surprise. The same set of clients (taxpayers) had seen quicker refund credits last year, but this year there is no intimation from the department. We have checked and every detail seems to be in place. We have found no good reason why the refund should be stuck,” says chartered accountant Karan Batra, Founder, Chartered Club.

These delays cannot be attributed to errors like the wrong bank account details shared by taxpayers, as they received the refund credit in the same accounts last year. “Moreover, had this been the case, the I-T department would have communicated this to the taxpayers. Around 5 percent of my clients are facing delays where the reasons are not clear. They did not have to deal with this issue last year,” says Batra.

It’s the lack of response from the tax department that has the CAs and taxpayers worried. “In several cases, the intimation order u/s 143(1) accepting the returned income has been issued by CPC (central processing centre), but still refund has not been credited to taxpayers' bank accounts. In some cases, taxpayers have received invalid bank account messages, despite no change in the bank account details. In the latter cases, taxpayers should revalidate their bank accounts and make online refund reissue requests," says Mayank Mohanka, Founder-Director, TaxAaram.com.

The I-T department ought to communicate better, feel CAs. “The lack of communication is causing anxiety. Some are concerned that their returns could have been picked up for scrutiny. A simple intimation stating that income tax return (ITR) is under process with an indicative timeline will calm the nerves,” says Batra.

Also read: ITR filing 2023-24: How to check income tax refund status

Common reasons for delay in tax refund

ITR processing and refund credit could face hurdles if the data in your return does not match the information in AIS (annual information statement) or Form-26AS (tax credit statement).

Pending assessment proceedings could constitute another key reason for holding back refund credit. “In some cases, where taxpayers are partners in firms, the I-T department could withhold the refund until the partnership firm’s returns are processed, so that there is finality,” says Mohanka.

Then, there could be other, more common causes. Errors in entering the bank account details to which refunds have to be credited is one of the common causes for tax refunds being stuck. According to the I-T department, your refund processing may not go through if your bank is not  pre-validated. This process is mandatory and you must complete it before filing your returns.

Similarly, a refund request could be rejected if the name mentioned in the bank account does not match your PAN details. If you have erroneously mentioned an invalid IFSC code for your bank account or have already closed the bank account selected for refund, it will not be processed, leading to a delay.

Also, your tax refund could be partially adjusted against taxes due, if any. In such cases, your refund amount and clearance date will be mentioned, but the status will read as: ‘Processed and partially refund adjusted’. Then, there is a possibility that the entire refund amount that you had claimed could be adjusted against tax dues. In such cases, this update will be displayed: ‘(return) Process and full amount adjusted’.

Your refund claim could also be rejected or there could be a failure in crediting the refund to your bank account. In such cases, the date and reasons for the failure will be displayed. For example, if your PAN is not operative as it is not linked to your Aadhaar, the website will display an alert, asking you to complete the process after paying the penal fee of Rs 1,000 under section 234/H.