Income Tax Refund Delays Raise Concerns Among Salaried Taxpayers
A growing number of salaried taxpayers awaiting income tax refunds for Assessment Year 2025–26 are facing unexpected delays, with refunds remaining stuck for weeks despite successful filing of returns. The common thread linking many of these cases is a mismatch between exemption claims in the Income Tax Return (ITR) and salary details reported by employers in Form 16.
The Income Tax Department has clarified through automated emails that refund processing has been temporarily paused, not cancelled, in cases where claimed exemptions appear higher than what is reflected in Form 16 (Annexure II). These cases are being flagged under internal risk parameters designed to prevent incorrect refunds.
Why Form 16 Mismatch Is Triggering Refund Holds
According to tax professionals, the issue arises when exemptions or deductions claimed by the taxpayer are not fully corroborated by employer-reported data. This includes popular claims such as:
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House Rent Allowance (HRA)
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Leave Travel Allowance (LTA)
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Certain deductions under Chapter VI-A
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Other salary-linked exemptions
If these benefits were claimed in the return but not reflected in Form 16 issued by the employer, the system flags the return as carrying a “significant mismatch”, leading to a pause in refund processing.
“In case of any mismatch between the details furnished in the ITR and financial data received by the tax department, an automated email or SMS is sent to the taxpayer,” said Gopal Bohra, Partner – Tax.
The department believes such mismatches can artificially inflate refund claims, which is why additional checks are being applied before releasing refunds.
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Refunds Are On Hold, Not Rejected
Tax experts stress that this development should not be viewed as a rejection or denial of refund. Instead, it is a preventive verification step.
Once the discrepancy is clarified—either by filing a revised return or ensuring consistency between documents—refunds will be processed in the normal course.
“Every notice from the tax department need not be looked at with contempt. The intention is to encourage voluntary compliance so that penalty provisions are not attracted,” said Ashok Mehta, Chartered Accountant and Managing Council Member of The Chamber of Tax Consultants.
He added that legitimate claims need not be reversed, but taxpayers must be conscious of documentation and possible penalty consequences if claims are not substantiated.
Emails Carry a Cautionary Signal for Taxpayers
The automated communication sent by the Income Tax Department carries a cautionary note. It warns that inaction may be viewed as deliberate, increasing the chances of the case being selected for deeper scrutiny or future assessment.
This does not mean immediate penalties, but it signals that taxpayers should actively review their filings rather than ignore the alert.
If a revised return has already been filed correcting the issue, the department has clarified that the email can be safely ignored.
Revised Return Deadline Becomes Crucial
A key takeaway from this episode is the importance of the December 31, 2025 deadline for filing a revised return for AY 2025–26.
Taxpayers who identify errors or inconsistencies can still correct them within this window without facing additional penalties beyond applicable tax dues.
“If someone fails to file a revised return by December 31, 2025, then from January 1, 2026, they will have to file an updated return, which in certain situations may attract penalties,” said Mehul Sheth, CA and Secretary of The Chamber of Tax Consultants.
According to him, the department’s email should be seen as a positive early warning system rather than an enforcement action.
Why Is the Department Flagging These Cases Now?
Experts believe this step reflects the tax department’s increasing reliance on data analytics and cross-verification.
“There can be various reasons—both genuine and otherwise. In a way, this is an opportunity provided to review the return of income filed,” Sheth said.
With real-time access to employer filings, Form 26AS, Annual Information Statements (AIS), and other data points, the system can quickly identify mismatches that may have gone unnoticed earlier.
What Should Taxpayers Do Next?
Tax experts advise a calm and methodical response. Taxpayers who receive such emails should take the following steps:
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Log in to the income tax e-filing portal
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Compare the ITR line-by-line with Form 16 and Form 26AS
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Verify whether exemption claims are fully reflected and documented
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File a revised return if discrepancies are found
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Retain supporting documents in case of future queries
If the claims are accurate and supported by documentation, no immediate action may be required, but vigilance is still advised.
A Compliance Nudge, Not a Crackdown
Overall, professionals view the refund pause as part of a broader shift towards pre-emptive compliance checks rather than post-refund recovery actions.
The department’s approach aims to reduce incorrect refunds upfront while giving taxpayers enough time to correct genuine errors without harsh consequences.
For salaried taxpayers, the episode underscores the importance of aligning employer disclosures with personal tax filings—and acting promptly when discrepancies arise—to ensure refunds are released smoothly.
